MANHATTAN ASSOCIATES INC - Annual Report: 2010 (Form 10-K)
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 000-23999
Manhattan Associates, Inc.
(Exact name of registrant as specified in its charter)
Georgia | 58-2373424 | |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
incorporation or organization) |
2300 Windy Ridge Parkway, Suite 1000 | ||
Atlanta, Georgia | 30339 | |
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (770) 955-7070
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of each exchange on which registered | |
Common Stock, $.01 par value per share | The Nasdaq Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or
15(d) of the Act. Yes o No þ
Note Checking the box above will not relieve any registrant required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No þ
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the
Registrant as of June 30, 2010 was $610,716,498, which was calculated based upon a closing sales
price of $27.55 per share of the Common Stock as reported by the Nasdaq Global Select Market on the
same day. As of February 16, 2011, the Registrant had outstanding 21,836,134 shares of Common
Stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrants definitive Proxy Statement for the Annual Meeting of Shareholders to be held
May 19, 2011 is incorporated by reference in Part III of this Form 10-K to the extent stated
herein.
MANHATTAN ASSOCIATES, INC.
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2010
Table of Contents
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2010
Table of Contents
Item Number | Page Number | |||||||
PART I |
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1 | 2 | |||||||
1A | 14 | |||||||
1B | 22 | |||||||
2 | 22 | |||||||
3 | 22 | |||||||
PART II |
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5 | 23 | |||||||
6 | 24 | |||||||
7 | 25 | |||||||
7A | 40 | |||||||
8 | 41 | |||||||
9 | 70 | |||||||
9A | 70 | |||||||
9B | 70 | |||||||
PART III |
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10 | 70 | |||||||
11 | 70 | |||||||
12 | 71 | |||||||
13 | 71 | |||||||
14 | 71 | |||||||
PART IV |
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15 | 71 | |||||||
73 | ||||||||
74 | ||||||||
Exhibit 21.1 | ||||||||
Exhibit 23.1 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 |
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Forward-Looking Statements
In addition to historical information, this Annual Report may contain forward-looking
statements relating to Manhattan Associates, Inc. Prospective investors are cautioned that any
such forward-looking statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those contemplated by such
forward-looking statements. Among the important factors that could cause actual results to differ
materially from those indicated by such forward-looking statements are delays in product
development, undetected software errors, competitive pressures, technical difficulties, market
acceptance, the impact of acquisitions, availability of technical personnel, changes in customer
requirements and general economic conditions. Additional factors are set forth in the Risk
Factors in Part I, Item 1A of this Annual Report. We undertake no obligation to update or revise
forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events
or changes in future operating results. Our Annual Report on Form 10-K is available through our
Website at www.manh.com.
PART I
Item 1. | Business |
Overview
We develop, sell, deploy, service and maintain supply chain software solutions that help
organizations optimize business advantages gained through those solutions while effectively
managing the long-term costs of operating them. Supply chain solutions help organizations ensure
that the right products are available to the right customers at the right time and at the right
cost, so that organizations can build customer loyalty, differentiate their brands, and calibrate
costs and revenues to align with organizational goals. Some key benefits of implementing our
solutions include:
| Mastering channel proliferation by being able to forecast and manage inventory, sales and returns through multiple channels (stores, web sites, catalogs, call centers) independently, yet execute customer interactions as a united entity to deliver consistent brand experiences, optimize revenue, and mitigate unnecessary and duplicative costs. | ||
| Coordinating workflows and communication with other participants in a supply chain ecosystem, including suppliers, customers and transportation providers; | ||
| Increasing visibility across the supply network to improve sales and customer order fill rates while reducing network inventory; | ||
| Balancing transportation and inventory costs with desired service levels by channel; | ||
| Increasing productivity and asset utilization in distribution centers, transportation networks and delivery channels, including retail stores, to capture more customer revenue and improve return on supply chain investments, including storage, labor, inventory and transportation investments; | ||
| Improving compliance with customer requirements, including radio frequency identification (RFID) and electronic product code (EPC) requirements; and | ||
| Accelerating eco-friendliness through green initiatives such as reducing carbon footprints and greenhouse gas emissions and improving reuse and recycling. |
Our point of view is that a platform-based approach is the best way to optimize supply chains
and supply chain ecosystems, meaning all of the interdependent elements both within and external to
an organization that interact to impact how effectively, efficiently and economically that
organizations supply chain operates. Supply chain ecosystems encompass disparate functions within
an organization that affect its supply chain (such as distribution, transportation, order lifecycle
management, inventory optimization, and planning and forecasting) as well as interactions with
entities outside the organization but integral to its supply chain, including manufacturers,
suppliers, distributors, trading partners, transportation providers, channels (such as catalogers,
store retailers, call centers and Web outlets) and consumers.
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Platform ThinkingTM describes the intelligence that infuses the way we
design our software, consult with our customers and deliver our solutions. Our rationale is built
on this premise: Making decisions about inventory, orders, transportation, and distribution in
isolation without considering data, workflows and inputs from each discipline in the supply chain
and from its ecosystem can lead
to more costly and suboptimal decisions. This is because each of these areas generates cost
and service-level consequences that impact the others directly or indirectly. Platform Thinking
gives organizations a unified view of their supply chains by replacing silo thinking with Whole
Chain AwarenessTM, a blend of insight and execution capabilities across supply chains
and supply chain ecosystems that delivers advanced levels of visibility, agility, responsiveness
and economy for organizations that depend on their supply chains for uncommon and strategic
advantage.
We deliver these benefits in a market-differentiating way through a comprehensive array of
supply-chain-centered people, principles, products, protocols and processes we call Manhattan
MORE®: Manhattans Optimized Roadmap to Excellence (See Figure 1). These elements work
together to coordinate insights, people, workflows, assets, events and tasks holistically across
supply chain functions from planning through execution. They also help to coordinate actions, data
exchange and communication among participants in supply chain ecosystems.
We were founded in 1990 in Manhattan Beach, California. References in this filing to the
Company, Manhattan, Manhattan Associates, we, our, and us refer to Manhattan
Associates, Inc., our predecessors, and our wholly-owned and consolidated subsidiaries. Our
principal executive offices are located at 2300 Windy Ridge Parkway, Suite 1000, Atlanta, Georgia
30339, and our telephone number is 770-955-7070.
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Industry Background
Globalization and technological advances have radically altered competition, service
expectations and business operating imperatives for modern organizations. Pressures such as
outsourcing, sales and distribution channel proliferation and convergence, growing item diversity
and volume to satisfy evolving global consumer demands, fluctuating fuel costs, global labor
sourcing, and regulatory and security requirements motivate organizations to closely examine not
only their supply chain operations, but also how they interact in supply chain ecosystems that
interlink suppliers, trading partners, manufacturers, sellers, distributors, transporters, channels
and customers. We believe this is because mastering supply chains and ecosystems in unique ways is
necessary to create sustainable competitive advantages in todays globally interacting commerce
environment.
Profitable operations, brand leadership and customer loyalty depend not only on product mix,
but also on the blends of servicesincluding item availability, channel choice, pricing options,
return policies, ease of buying, ease of delivery and technical or operational supportthat
uniquely surround those products to satisfy targeted customer desires in competitively
differentiating ways. Supply chain solutions not only help organizations manage logistics
operations, but also enable them to coalesce data, workflows, events and tasks from across the web
of suppliers, trading partners, customers and other participants in a supply chain ecosystem to
better understand customer preferences and buying motivations and to make optimal business
decisions.
Organizations apply supply chain technology, software and services to solve identified
operational inefficiencies or create operational advantages in ways that can scale as their
businesses grow. They also look to easily integrate supply chain solutions with other technology,
such as enterprise resource planning (ERP) systems, customer relationship management (CRM) systems,
e-business systems, web- and mobile-based commerce systems, material handling equipment (MHE) and
other solutions involved in creating efficient, competitive and profitable operations.
Manhattan Associates Software Solution Portfolios
Our platform-based supply chain software solution portfolios Manhattan SCOPE®
and Manhattan SCALETM are designed with our Platform Thinking approach to deliver
both business agility and total cost of ownership advantages to customers. Manhattan SCOPE
(Supply Chain Optimization, Planning through Execution, depicted in Figure 2) leverages our Supply
Chain Process Platform (SCPP, depicted in Figure 3) to unify the full breadth of the supply chain,
while Manhattan SCALE (Supply Chain Architected for Logistics Execution, depicted in Figure 4)
leverages Microsofts .NET® platform to unify logistics functions.
Our solutions operate across Unix, IBM System I, Linux and Microsoft.NET computing platforms,
as well as on multiple hardware platforms and systems. Because supply chain solutions necessarily
interact with other business operation systems, our solutions are designed to interoperate with
software from other providers as well as with a companys existing legacy systems. This interfacing
and open system capability enables customers to continue using existing computer resources and to
choose among a wide variety of existing and emerging computer hardware and peripheral technologies.
We provide adapters for many ERP systems to enhance system communication and reduce implementation
costs, including (but not limited to) Oracle, SAP and Microsoft Dynamics AX. We also offer certain
of our solutions in both premise software and cloud computing models so that customers can select
the option that best meets their requirements for control, flexibility, cost of ownership, and
time-to-deployment.
Manhattan SCOPE®
SCOPE is ideally suited for companies that consider supply chain software, processes and
technology strategic to market leadership. Predictive and algorithmic technology embedded in SCOPE
helps organizations refine decisions dynamically as market or operational conditions change.
Advantages derived from coordinated real-time visibility, event management, ecosystem collaboration
and intelligence across supply chain operational departments and functions avert having decisions
in one supply chain area unexpectedly affect another unfavorably. By organizing supply chain
optimization holistically, Manhattan enables customers to fine-tune costs, profitability and
service levels as their business objectives and market conditions evolve.
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Supply Chain Platform Applications
SCOPE Platform Applications span the entire portfolio to provide key visibility,
intelligence and adaptive functionality across the enterprise. These solutions offer the broad
supply chain insight and analytics that are critical to an executives ability to proactively
manage the holistic supply chain. Whether deployed with our Solution Suite applications or
integrated with other enterprise systems, our Platform Applications provide a comprehensive range
of event and schedule tracking; alerts and notifications; inventory, order and shipment visibility;
cost monitoring and tracking; leading-edge analytics, and reporting with graphical depictions of
critical supply chain performance metrics.
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Supply Chain Solution Suites
Each Solution Suite is designed to enable users to proactively plan, monitor and execute against supply chain objectives.
Planning and Forecasting enables organizations to sense and respond to
demand, and to support all levels of enterprise merchandise planning, from strategic level planning
down to assortment and key item planning. Our Demand Forecasting solution leverages a unique
Unified Forecasting MethodTM (UFM) to enable organizations to optimally
forecast and manage by specific channel challenging planning and forecasting situations,
including forecasting buying patterns for seasonal items, intermittently sold items, and items that
sell in different patterns and at different paces in different channels. Customer Preference
Planning capabilities use multivariable shopper preference data to create merchandise, pricing and
promotion plans tuned to how customers think when shopping and buying across multiple channels
(including stores, catalogs, the web, and call centers) so retailers understand relationships among
product type, style, brand, color, fabrication and price when customers make decisions to buy.
Inventory Optimization enables enterprises to reduce overall network inventory to
release working capital while improving sales and customer order fill rates. Inventory Optimization
also provides analytical tools to better balance the financial trade-off between improving customer
service levels and overall inventory investments. Our multi-echelon, all-channel solution helps
organizations manage distribution networks with more than one type or level of distribution center
between suppliers and various endpoints. Vendor Managed Inventory and Collaboration Gateway
solutions help formulate tighter, lasting relationships with key trading partners, such as
replenishing products into customers locations or sharing key supply chain performance indicators.
Order Lifecycle Management orchestrates the order, fulfillment and returns processes
across all channels to identify additional revenue opportunities, streamline inventory investments,
match available inventory to current demand regardless of channel, avoid both overstock and
out-of-stock situations, and reduce overall fulfillment costs. For retailers, in-store and call
center capabilities enable associates to locate and sell items from across a companys supply chain
network to meet real-time customer demand.
Transportation Lifecycle Management optimizes all aspects of transporting product
through supply chains, from procurement through delivery. The system helps companies manage
assets, timing, accuracy and costs for both inbound and outbound shipments, and across private and
contracted fleets. The solution also interconnects transportation partners and suppliers to improve
visibility to initial and changing requirements as well as to improve delivery and billing
accuracy.
Distribution Management is designed to effectively manage the key assets required to
run complex distribution operations, and to move goods and information through a warehouse with
precision and velocity. The suite enables (among other processes) knowing what inventory will be
arriving at a distribution center; receiving, putting away and shipping inventory, and managing
distribution-related labor.
X-Suite Solutions
X-Suite Solutions leverage Manhattans SCPP to synthesize capabilities of two or
more solutions or solution components to solve a specific supply chain problem. For example, Flow
Management synthesizes Demand Forecasting, Replenishment, Supply Chain Visibility, Distributed
Order Management and Warehouse Management, while Extended Enterprise Management synthesizes
Supplier Enablement, Hub Management, Transportation Enablement, Store / Consumer Gateway,
Collaborative Gateway, Supply Chain Visibility and Supply Chain Event Management.
Flow Management improves supply chain agility while reducing the volume of inventory
required to deliver defined customer service levels. In a flow-through distribution model, goods
literally flow directly from arriving at a distribution center to being shipped to their
destination, without being put away in the interim. Businesses achieve the greatest benefit from a
flow-through distribution model only by synchronizing demand management, inventory optimization,
purchase order allocations, and the physical distribution of inventory. Flow Management enables
organizations to evolve from a facilities-based distribution model to a more holistic,
network-based model. Organizations leverage Flow Management to free inventory to drive maximum
profitability and customer service across channels; redirect inbound supply directly to customers,
alternate stores or distribution centers based on real-time demand signals; and optimize
cross-channel inventory by using the same enterprise-wide supply planning and inventory management
process.
Extended Enterprise Management connects organizations with supply chain ecosystem
participants to create insight to supply chain events and improve inventory ordering and movement
through supply chains. The solution facilitates quick and fluid interactions with trading partners,
optimizes order management, creates compliant case labels and advanced shipment notifications
upstream, assures quality inventory and shipments, and senses and responds efficiently to supply
chain events to increase on-time delivery rates, improve inventory control and meet demand
expectations.
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Supply Chain Process Platform
At the foundation of Manhattan SCOPE is our Supply Chain Process Platform (SCPP),
which utilizes a service-oriented architecture (SOA), common data model, collaborative gateways and
an optimization engine (among other constructs) to facilitate supply chain transformations that
help our customers create and sustain competitive advantages. Specific elements of Manhattans
SCPP, along with related core benefits, are detailed in Figure 3.
Among its overall benefits, our SCPP enables customers using multiple Manhattan SCOPE
applications to achieve Cross-Application OptimizationTM. Cross-Application
Optimization is our term for the compound benefits derived not only from optimizing multiple
functional supply chain elements individually, but also collectively by considering factors across
multiple functions in a supply chain (warehouse management, transportation, inventory and labor,
for example) simultaneously, so that their individual and related impacts inform each decision to
determine the optimal course of action for the organization as a whole. Our SCPPs common
architecture also enables customers to speed implementations, simplify upgrades, and achieve lower
total cost of ownership over time.
Manhattan SCALETM
SCALE is our portfolio of logistics execution solutions built on the Microsoft®.NET
platform. It is targeted toward companies with execution-focused supply chain needs that require
speed-to-value, resource-light system configuration and maintenance, and the ability to quickly
scale their logistics operations up or down in response to market fluctuations or business
requirement changes. SCALE combines the features of Trading Partner Management, Yard Management,
Warehouse Visibility and Optimization, Warehouse Management and Transportation Execution, as shown
in Figure 4.
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Because SCALE leverages a common platform, solutions share common data elements, and each user
can access all applications through a single sign-on. Users also can set up dashboards that
enable easy access to real-time information most relevant to their jobs. SCALEs ease of
deployment, operation and support make it a popular choice for organizations operating in countries
with emerging and developing economies, and where technical support resources are limited.
Professional Services
We advise and assist our customers in planning and implementing our solutions through our
global Professional Services Organization. To ensure long-term successful customer relationships,
consultants assist customers with the initial deployment of our systems, the conversion and
transfer of the customers historical data onto our systems, and ongoing training, education and
system upgrades. We believe our Professional Services teams enable customers to implement our
solutions knowledgeably and in the appropriate amount of time; help customers achieve expected
results from system investments; continuously identify new opportunities for supply chain
advancements; and meaningfully add to our industry-specific knowledge base to inform future
implementations and product innovations.
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Although our Professional Services are optional, substantially all of our customers use at
least some portion of these services to implement and support our software solutions. Professional
Services typically are rendered under time and materials-based contracts, with services typically
billed by the hour. Professional Services sometimes are rendered under fixed-fee based contracts,
with payments due on specific dates or milestones. We believe that increased sales of our software
solutions will drive higher demand for our consulting services.
We believe our Professional Services team delivers unique supply chain expertise to our
customers through industry-specific best-practices protocols and processes developed through the
collective knowledge we have gained in more than 3,600 installations worldwide. We also extensively
train our consulting personnel on supply chain operations and on our solutions.
Business consultants, systems analysts and technical personnel assist customers in all phases
of implementing our systems, including planning and design, customer-specific module configuration,
on-site implementation or conversion from existing systems, and integration with customer systems
such as Enterprise Resource Planning (ERP), web- and mobile-based commerce platforms, and Material
Handling Equipment (MHE) systems. At times, third-party consultants, such as those from major
systems integrators, assist our customers with certain implementations.
Customer Support Services and Software Enhancements
We offer a comprehensive program that provides our customers with software upgrades for
additional or improved functionality, and technological advances incorporating emerging supply
chain and industry initiatives. Over the past three years, our
annual renewal rate of customers subscribing to comprehensive support and enhancements has been
greater than 90%. We are able to remotely access customer systems to perform diagnostics, provide
on-line assistance, and facilitate software upgrades. We offer 24 hour customer support every day
of the year, plus software upgrades for an annual fee that is paid in advance and is based on the
solutions the customer has and the service level required. Software upgrades are provided under
this program on a when-and-if- available basis.
Training
We offer training in a structured environment for new and existing users. Training programs
are provided at fixed fees per-person, per-class, and cover topics such as (but not limited to)
solution use, configuration, implementation and system administration. Several computer-based
training programs can be purchased for a fixed fee for use at client sites.
Hardware Sales
Along with software licenses, and as a convenience for our customers, we sell a variety of
hardware developed and manufactured by others, including (but are not limited to) computer
hardware, radio frequency terminal networks, RFID chip readers, bar code printers and scanners, and
other peripherals. We sell all hardware pursuant to agreements with manufacturers or through
distributor-authorized reseller agreements. These agreements entitle us to purchase hardware at
discount prices, and to receive technical support during product installations and in the event of
any subsequent product malfunctions. We do not maintain hardware inventory as we generally purchase
hardware from vendors only after receiving related customer orders.
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Strategy
Our objective is to extend our position as the best global supply chain solutions provider for
supply chain leaders, meaning organizations intent on creating and sustaining market advantages by
leveraging supply chain solutions. Our solutions help global distributors, wholesalers, retailers,
logistics providers and manufacturer successfully manage accelerating and fluctuating market
demands, as well as master the increasing complexity and volatility of their local and global
supply chains. We believe our solutions are advanced, highly functional and highly scalable. They
are designed to enable organizations to: create customer experiences consistent with their brand
values; improve relationships with suppliers, customers and logistics providers; leverage
investments across supply chain functions; effectively manage costs; and meet dynamically changing
customer requirements. We believe our solutions are uniquely positioned to holistically optimize
supply chains from planning through execution, and that customers can leverage this holistic
approach to create operational and market advantages. Strategies to accomplish our objectives
include (but are not limited to) the following:
Develop and Enhance Software Solutions. We intend to continue to focus our research and
development resources on enhancing our supply chain solutions. We offer what we believe to be the
broadest and most richly-featured software portfolio in the supply chain solutions marketplace. To
continuously expand functionality and value, we plan to continue to provide enhancements to
existing solutions and to introduce new solutions to address evolving industry standards and market
needs. We identify these opportunities through our Product Management, Professional Services,
Customer Support and Account Management organizations, through interactions such as ongoing
customer consulting engagements and implementations; sessions with our solution user groups;
association with leading industry analyst and market research firms; and participation on industry
standards and research committees. Our solutions address needs in various vertical markets,
including retail, consumer goods, food and grocery, logistics service providers, industrial and
wholesale, high technology and electronics, life sciences and government. We intend to continue to
enhance our solutions to meet the dynamic requirements of these and new vertical markets as
business opportunities dictate.
Expand International Presence. We believe that our solutions offer significant benefits to
customers in markets outside the United States, and for organizations with global operations.
Approximately 980 out of a total of approximately 1,925 Manhattan employees work outside the United
States to build international sales, service our international clients, and further develop our
solutions. We have offices in Australia, China, France, India, Japan, the Netherlands, Singapore and the United Kingdom, as well as representatives in Mexico and reseller partnerships in
Latin America, Eastern Europe, the Middle East, South Africa and Asia. Our Europe, Middle East, and
Africa (EMEA) operations support sales, implementation services and customer support functions for
customers in Europe as well as a number of customers across the Middle East, concentrated in
countries we consider politically and economically stable, such as Saudi Arabia, United Arab
Emirates, Kuwait, Turkey, Israel, Jordan, and Oman. Our Asia Pacific (APAC) operations service
emerging opportunities in China, Southeast Asia and India, as well as more established markets in
Australia and New Zealand. Our international strategy includes leveraging the strength of our
relationships with current U.S.-based
customers that also have significant overseas operations, and pursuing strategic marketing
partnerships with international systems integrators and third-party solution providers.
Expand Our Strategic Alliances and Indirect Sales Channels. We currently sell our products
primarily through our direct sales personnel, and through partnership agreements with a select
number of organizations in emerging markets where we do not currently have a direct sales presence.
We have worked on joint projects and joint sales initiatives with industry-leading consultants and
software systems implementers, including most of the large consulting firms and other systems
consulting firms specializing in our targeted industries, to supplement our direct sales force and
professional services organization. We have been expanding our indirect sales channels through
reseller agreements, marketing agreements, and agreements with third-party logistics providers.
These alliances extend our market coverage and provide us with new business leads and access to
trained implementation personnel.
Acquire or Invest in Complementary Businesses. We continuously evaluate strategic acquisition
opportunities of technologies, solutions and businesses that are consistent with our platform-based
strategy and enable us to enhance and expand our supply chain planning and execution solutions and
service offerings. Preferred acquisition targets are those that would: be complementary to our
existing solutions and technologies; expand our geographic presence and distribution channels;
extend our presence into additional vertical markets with challenges and requirements similar to
those we currently serve; and further solidify our leadership position within the primary
components of supply chain planning and execution.
Sales and Marketing
We employ multi-disciplinary sales teams that consist of professionals with industry
experience in sales and technical sales support. To date, we have generated the majority of our
revenue from software sales through our direct sales force. We plan to continue to invest in our
sales, services and marketing organizations within the United States, EMEA, and APAC, and to pursue
strategic marketing partnerships. We conduct comprehensive global marketing programs that include
prospect profiling and targeting, lead generation, public relations, analyst relations, trade show
attendance and sponsorships, supply chain conference hosting, online marketing, joint promotion
programs with vendors and consultants, and ongoing customer communication programs.
Our sales cycle typically begins with the generation of a sales lead through in-house
telemarketing efforts, targeted promotions, web inquiries, trade show presence, speaking
engagements, hosted seminars, or other means of referral or the receipt of a request for
proposal from a prospective customer. Leads are qualified and opportunities are closed through a
process that includes telephone-based assessments of requirements; responses to requests for
proposals; presentations and product demonstrations; site visits and/or reference calls with
organizations already using our supply chain solutions; and contract negotiations. Sales cycles
vary substantially from opportunity to opportunity, but typically require six to twelve months.
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In addition to new customer sales, we plan to continue to leverage our existing customer base
to drive revenue from system upgrades, sales of additional licenses of purchased solutions, and
sales of new or add-on solutions. To efficiently penetrate emerging global markets, we leverage
indirect sales channels, including sales through reseller agreements, marketing agreements and
agreements with third-party logistics providers. To extend our market coverage, generate new
business leads and provide access to trained implementation personnel, we leverage strategic
alliances with systems integrators skilled at implementing our solutions. Business referrals and
leads are positively influenced by systems integrators, which include most of the large consulting
firms and other systems consulting firms specializing in our targeted industries.
Our Manhattan Value Partner (Manhattan MVP) and Manhattan GeoPartner programs foster joint
sales and marketing with other organizations. Manhattan Value Partners are proven software and
hardware providers, trusted third-party integrators and consultants who bring added value to
customer engagements through vertical industry knowledge or technical specialization. Manhattan
MVPs support and complement our supply chain solutions so we can provide customers with a
comprehensive approach that is suited to their business requirements. This collaborative program is
designed to benefit both Manhattan and our partners through tailored joint marketing, sales and, in
some cases, co-development efforts. Among others, Manhattan MVPs include Accenture, Deloitte, IBM,
Microsoft and Motorola. Manhattan GeoPartners represent a select group of companies that sell and
implement our solutions in specific geographies around the world, each providing valuable localized
expertise to meet customer needs in areas such as Western Europe, Eastern Europe, Russia, the
Middle East, Latin America, Africa and the Asia Pacific region.
Customers
To date, our customers have been suppliers, manufacturers, distributors, retailers and
logistics providers in a variety of industries. The following table sets forth a representative
list of customers that contracted to purchase solutions and services from us in 2010.
3 Suisses International
A.N. Deringer, Inc.
AAA Cooper Transportation, Inc.
adidas AG
Aluminium Specialities Group
APL Co.
Archbrook Laguna
Associated Hygienic Products LLC
Avon Products, Inc.
Axstores AB
Baoxiniao Group Co.
Baylor Trucking, Inc.
Beijing Pacific Logistics Co.
Benjamin Moore & Co.
Bodega Latina Corporation
BodyBuilding.com, LLC
Bon Preu SAU
Brown Shoe Company, Inc.
Bulova Corporation
Bus Company
C&J Clark America, Inc
Catering Engros A/S
CEVA Logistics U.S., Inc.
Challenger Motor Freight, Inc.
Chanel (Australia) Pty Ltd
Chanel (China) Co.
Chicos Retail Services, Inc.
Converse, Inc.
Cornerstone Brands, Inc.
Costas PTY
Costas PTY Limited
Cotton on Group Services
Deli XL B.V.
Devanlay SA
Devil-Dog Mfg. Co.
DHL Supply Chain Asia Pacific
Dicks Sporting Goods, Inc.
DSW, Inc.
Dubois Chemicals, Inc.
Epes Carriers, Inc.
ERC
Excell Home Fashions Inc.
A.N. Deringer, Inc.
AAA Cooper Transportation, Inc.
adidas AG
Aluminium Specialities Group
APL Co.
Archbrook Laguna
Associated Hygienic Products LLC
Avon Products, Inc.
Axstores AB
Baoxiniao Group Co.
Baylor Trucking, Inc.
Beijing Pacific Logistics Co.
Benjamin Moore & Co.
Bodega Latina Corporation
BodyBuilding.com, LLC
Bon Preu SAU
Brown Shoe Company, Inc.
Bulova Corporation
Bus Company
C&J Clark America, Inc
Catering Engros A/S
CEVA Logistics U.S., Inc.
Challenger Motor Freight, Inc.
Chanel (Australia) Pty Ltd
Chanel (China) Co.
Chicos Retail Services, Inc.
Converse, Inc.
Cornerstone Brands, Inc.
Costas PTY
Costas PTY Limited
Cotton on Group Services
Deli XL B.V.
Devanlay SA
Devil-Dog Mfg. Co.
DHL Supply Chain Asia Pacific
Dicks Sporting Goods, Inc.
DSW, Inc.
Dubois Chemicals, Inc.
Epes Carriers, Inc.
ERC
Excell Home Fashions Inc.
EXE c&t Co.
Exel, Inc.
Factory Motor Parts
Fantastic Holdings Limited
Fasteners for Retail
Fitness Quest
Five Below, Inc.
Gordon Trucking, Inc.
Guangdong Xin Yang Logistics Equipment
Guangzhou Fengshen Logistics Co.
Guitar Center
H.J. Heinz Company LP
Hawaii Food Service Alliance LLC
Hawaii Transfer Co.
HVHC, Inc.
IFC Global Logistics
Innotrac Corporation
Itochu Logistics China Co.
Jasco Products Company LLC
Jefferson Smurfit Corporation
Kane Warehousing, Inc.
Kawasaki-Rikuso Transportation Co.
Keppel Logistics Pte. Ltd.
Lam Soon Edible Oils
Lamps Plus, Inc.
Lenox Corporation
Leroy Merlin France SA
Limited Brands, Inc.
McKesson Corporation
Mitsubishi Fuso Truck
Mitsubishi Motors
Morris & Dickson Co.
MTD Products, Inc.
Mulberry Group
Natures Best
Northern Safety Co. Inc.
Oatey Co.
Olympus Corporation of the Americas
OReilly Automotive, Inc.
Osotspa Co.
Panalpina Management AG
Exel, Inc.
Factory Motor Parts
Fantastic Holdings Limited
Fasteners for Retail
Fitness Quest
Five Below, Inc.
Gordon Trucking, Inc.
Guangdong Xin Yang Logistics Equipment
Guangzhou Fengshen Logistics Co.
Guitar Center
H.J. Heinz Company LP
Hawaii Food Service Alliance LLC
Hawaii Transfer Co.
HVHC, Inc.
IFC Global Logistics
Innotrac Corporation
Itochu Logistics China Co.
Jasco Products Company LLC
Jefferson Smurfit Corporation
Kane Warehousing, Inc.
Kawasaki-Rikuso Transportation Co.
Keppel Logistics Pte. Ltd.
Lam Soon Edible Oils
Lamps Plus, Inc.
Lenox Corporation
Leroy Merlin France SA
Limited Brands, Inc.
McKesson Corporation
Mitsubishi Fuso Truck
Mitsubishi Motors
Morris & Dickson Co.
MTD Products, Inc.
Mulberry Group
Natures Best
Northern Safety Co. Inc.
Oatey Co.
Olympus Corporation of the Americas
OReilly Automotive, Inc.
Osotspa Co.
Panalpina Management AG
Panther Expedited Services, Inc.
Performance Team Freight Systems, Inc.
Petra Trading & Investment Company
Petro LLC
PETsMART, Inc.
Phillips-Van Heusen Corporation
Pickwick SAS
Prime Success International Group
Promate Electronic
PT Multitrend Indo
Qingdao Haier Logistics Co.
Red Diamond, Inc.
RGH Enterprises, Inc.
Rocky Brands, Inc.
Sanitex
SFI Food Sdn Bhd
Shanghai KW Logistics Co.
Shanghai Shenda Logistics Co.
Sigma Aldrich
Southern Wine & Spirits of America, Inc.
Speed Transportation
Super Cheap Auto
Syms Corporation
The C.D. Hartnett Company
The Chamberlain Group, Inc.
The Harvard Drug Group LLC
Tory Burch
Total Sweeteners, Inc.
Uhrenholt
Union Underwear Company, Inc.
Unipart Logistics Limited
United Natural Foods, Inc.
Vera Bradley Designs
VF Services, Inc.
VIP Shop
Wakefern Food Corporation
Wirtz Corporation
Yankee Candle Company, Inc.
YiFeng Super Drugstore
Performance Team Freight Systems, Inc.
Petra Trading & Investment Company
Petro LLC
PETsMART, Inc.
Phillips-Van Heusen Corporation
Pickwick SAS
Prime Success International Group
Promate Electronic
PT Multitrend Indo
Qingdao Haier Logistics Co.
Red Diamond, Inc.
RGH Enterprises, Inc.
Rocky Brands, Inc.
Sanitex
SFI Food Sdn Bhd
Shanghai KW Logistics Co.
Shanghai Shenda Logistics Co.
Sigma Aldrich
Southern Wine & Spirits of America, Inc.
Speed Transportation
Super Cheap Auto
Syms Corporation
The C.D. Hartnett Company
The Chamberlain Group, Inc.
The Harvard Drug Group LLC
Tory Burch
Total Sweeteners, Inc.
Uhrenholt
Union Underwear Company, Inc.
Unipart Logistics Limited
United Natural Foods, Inc.
Vera Bradley Designs
VF Services, Inc.
VIP Shop
Wakefern Food Corporation
Wirtz Corporation
Yankee Candle Company, Inc.
YiFeng Super Drugstore
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Our top five customers in aggregate accounted for 10% of total revenue for the years ended
December 31, 2010 and 11% of total revenue for each of the years ended December 31, 2009 and 2008,
respectively. No single customer accounted for more than 10% of our total revenue in 2010, 2009 or
2008.
Product Development
We focus our development efforts on adding new functionality to existing solutions;
integrating our various solution offerings; enhancing the operability of our solutions across our
Supply Chain Process Platform and across distributed and alternative hardware platforms, operating
systems and database systems; and developing new solutions. We believe that our future success
depends, in part, on our ability to continue to enhance existing solutions, to respond to
dynamically changing customer requirements, and to develop new or enhanced solutions that
incorporate new technological developments and emerging supply chain and industry standards. To
that end, development frequently focuses on base system enhancements and incorporating new user
requirements and features into our solutions. As a result, we deliver packaged, highly configurable
solutions with increasingly rich functionality rather than custom-developed software. We also
deliver interface toolkits for many major ERP systems to enhance communication and improve data
flows between our core solutions and our clients host systems.
We leverage internal and external scientific advisors to inform our solution strategies and
research and development approaches with the most advanced thinking on supply chain opportunities,
challenges and technologies. Our internal research team is comprised of Ph.D.-credentialed math and
science experts who work on creating and solving algorithms and other constructs that advance the
optimization capabilities and other aspects of our solutions. Our external Science Advisory Board
unites the thinking of experts from leading educational institutions known for their supply chain
disciplines, and practitioners from organizations deploying supply chain technology in innovative
and market-advancing ways. Together, our Research Team and Science Advisory Board inform both the
practical business approaches and the mathematical and scientific inventiveness of our solutions.
We conduct most development internally in order to retain development knowledge and promote
programming standards continuity. However, we may periodically outsource some projects that can be
performed separately and/or that require special skills. We also use third-party research and
development companies to localize our products into Chinese, French, Japanese, and Spanish. Since
2002 we have operated a development center in Bangalore, India, which houses approximately 440
research and development professionals.
Our research and development expenses for the years ended December 31, 2010, 2009 and 2008
were $40.5 million, $36.7 million and $48.4 million, respectively. We intend to continue to invest
significantly in product development.
Competition
Our solutions are solely focused on the supply chain planning and execution markets, which
have been consolidating rapidly, are intensely competitive, and are characterized by rapid
technological change. The principal competitive factors affecting the markets for our solutions
include: industry expertise; company and solution reputation; company viability; compliance with
industry standards; solution architecture; solution functionality and features; integration
experience, particularly with ERP providers and material handling equipment providers; ease and
speed of implementation; proven return on investment; historical and current solution quality and
performance; total cost of ownership; solution price; and ongoing solution support structure. We
believe that we compete favorably with respect to each of these factors.
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Our competitors are diverse and offer a variety of solutions directed at various aspects of
the supply chain, as well as at the enterprise as a whole. Our existing competitors include:
| Corporate information technology departments of current or potential customers capable of internally developing solutions; | ||
| Enterprise Resource Planning (ERP) vendors, including Oracle, SAP, and Infor, among others; | ||
| Supply chain execution vendors, including RedPrairie Holding, Inc., HighJump Software Inc., and CDC Software Corporation, among others; | ||
| Supply chain planning vendors, including JDA Software Group, Inc., and SAS Institute Inc., among others; and | ||
| Smaller independent companies that have developed or are attempting to develop supply chain execution solutions and/or supply chain planning solutions that apply in specific countries and/or globally. |
We anticipate facing increased competition from ERP and Supply Chain Management (SCM)
applications vendors and business application software vendors that may broaden their solution
offerings by internally developing or by acquiring or partnering with independent developers of
supply chain planning and execution software. Compared with us, some of these ERP and SCM companies
and other potential competitors have longer operating histories; significantly more financial,
technical, marketing and other resources; greater name recognition; broader solutions; and larger
installed bases of customers. To the extent that ERP and SCM vendors or other large competitors
develop or acquire systems with functionality comparable or superior to ours, their larger customer
bases, long-standing customer relationships, and ability to offer broader solutions outside the
scope of supply chain could create significant competitive advantage for them. It also is possible
that new competitors or alliances among current and/or new competitors could emerge to win
significant market share. Increased competition could result in price reductions, fewer customer
orders, reduced earnings and margins and loss of market share. In turn, this could have a material
adverse effect on our business, results of operations, cash flow, and financial condition.
We believe we have established meaningful competitive advantages and have built barriers to
market entry through our supply chain expertise; our platform-based solution approach; our track
record of continuous supply chain innovation and investment; our strong and endorsing customer
relationships; our significant success in deploying and supporting supply chains for market-leading
companies; and our ability to out-execute others in identifying sales opportunities and
demonstrating expertise throughout the sales cycle. However, to further our market success, we must
continue to respond promptly and effectively to technological change and competitors innovations.
Consequently, we cannot assure that we will not be required to make substantial additional
investments in research, development, marketing, sales and customer service efforts in order to
meet any competitive threat, or that we will be able to compete successfully in the future.
International Operations: Segments
We have three reporting segments, based on geographic location: the Americas; Europe, Middle
East and Africa (EMEA); and Asia Pacific (APAC). For further information on our segments, see
Note 8 to our consolidated financial statements. Our international revenue was approximately $80.7
million, $58.0 million and $81.5 million for the years ended December 31, 2010, 2009 and 2008,
respectively, which represents approximately 27%, 24% and 24% of our total revenue for the years
ended December 31, 2010, 2009 and 2008, respectively. International revenue includes all revenue
derived from sales to customers outside the United States. We now have approximately 980 employees
outside the United States.
Proprietary Rights
We rely on a combination of copyright, trade secret, trademark, service mark and trade dress
laws, confidentiality procedures and contractual provisions to protect our proprietary rights in
our products and technology. We have registered trademarks for Manhattan Associates and the
Manhattan Associates logo, as well as Manhattan SCOPE, SCOPE, Manhattan MORE and a number of
solutions and features. We also have trademark applications submitted for Zero Disappointment
Retail. We generally enter into confidentiality and assignment-of-rights agreements with our
employees, consultants, clients and potential clients and limit access to, and distribution of, our
proprietary information. We license our solutions to our customers and restrict the customers use
for internal purposes and do not give customers the right to sublicense the solutions. However, we
believe that this provides us only limited protection. Despite our efforts to safeguard and
maintain our proprietary rights both in the United States and abroad, we cannot ensure that we will
successfully deter misappropriation or independent third-party development of our technology, or
that we can prevent an
unauthorized third party from copying or obtaining and using our products or technology. In
addition, policing unauthorized use of our solutions is difficult, and while we are unable to
determine the extent to which piracy of our software solutions exists, as is the case with any
software company, piracy could become a problem.
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As the number of supply chain management solutions increases and solution functionality
continues to overlap, companies that develop software may increasingly become subject to claims of
infringement or misappropriation of intellectual property rights. Third parties may assert
infringement or misappropriation claims against us in the future for current or future products.
Any claims or litigation, with or without merit, could be time-consuming, result in costly
litigation, divert managements attention and cause product shipment delays or require us to enter
into royalty or licensing arrangements. Any royalty or licensing arrangements, if required, may not
be available on terms acceptable to us, if at all, which could have a material adverse effect on
our business, financial condition and results of operations. Adverse determinations in such claims
or litigation could also have a material adverse effect on our business, financial condition and
results of operations.
We may be subject to additional risks as we enter into transactions in countries where
intellectual property laws are not well developed or are poorly enforced. Legal protections of our
rights may be ineffective in such countries. Litigation to defend and enforce our intellectual
property rights could result in substantial costs and diversion of resources, and could have a
material adverse effect on our business, financial condition and results of operations, regardless
of the final litigation outcome. Despite our efforts to safeguard and maintain our proprietary
rights both in the United States and abroad, we cannot assure that we will be successful in doing
so, or that the steps we take in this regard will adequately deter misappropriation or independent
third party development of our technology, or effectively prevent an unauthorized third party from
copying or otherwise obtaining and using our products or technology. Any of these events could have
a material adverse effect on our business, financial condition and results of operations.
Employees
At December 31, 2010, we employed approximately 1,925 employees worldwide, of which
approximately 950 employees are based in the Americas, approximately 140 employees in EMEA, and
approximately 835 employees in APAC and India. Our distribution by function: approximately 150 in
sales and marketing, 990 in services, 625 in research and development (R&D) and 160 in general
and administration.
Available Information
We file annual, quarterly and current reports and other information with the Securities and
Exchange Commission (the SEC or the Commission). These materials can be inspected and copied at
the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Copies of these
materials may also be obtained by mail at prescribed rates from the SECs Public Reference Room at
the above address. Information about the Public Reference Room can be obtained by calling the SEC
at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and
information statements, and other information regarding issuers that file electronically with the
SEC.
On our website, www.manh.com, we provide free of charge our Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments thereto, as soon
as reasonably practicable after they have been electronically filed or furnished to the SEC.
Information contained on our website is not part of this Form 10-K or our other filings with the
SEC.
Additionally, our code of business conduct and ethics and the charters of the Audit,
Compensation and Nomination and Governance Committees of the Board of Directors are available on
our website.
Item 1A. | Risk Factors |
You should consider the following factors in evaluating our business or an investment in our
common stock. If any of the following or other risks actually occurs, our business, results of
operations, cash flow and financial condition could be materially adversely affected. In such case,
the trading price of our common stock could decline.
Our performance can be negatively impacted by global macroeconomic or other external
influences which could have a material adverse effect on our business, results of operations, cash
flow and financial condition. We are a technology company selling technology-based solutions with
total pricing, including software and services, in many cases, exceeding $1.0 million.
Reductions in the capital budgets of our customers and prospective customers could have an adverse
impact on our ability to sell our solutions. We believe that concerns over the slow economic
recovery within the United States and/or other geographic regions in which we operate, continued
delays in capital spending, or the timing of deals closed could have a material adverse impact on
our business and our ability to compete, and is likely to further intensify in our already
intensely competitive markets.
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Disruptions in the financial and credit markets and economic downturns may adversely affect
our business, results of operations, cash flow and financial condition. Demand for our products
depends in large part upon the level of capital and maintenance expenditures by many of our
customers. Decreased capital and maintenance spending could have a material adverse effect on the
demand for our products and our business, results of operations and financial condition.
Disruptions in the financial markets, including the bankruptcy or restructuring of certain
financial institutions, such as the events that began in the second half of 2008 from which the
financial markets are now slowly recovering, may adversely impact the availability of credit
already arranged and the availability and cost of credit in the future, which could result in the
delay or cancellation of projects or capital programs on which our business depends.
In addition, continuing weakness or further deterioration in regional economies or the world
economy could negatively impact the capital and maintenance expenditures of our customers and end
users. There can be no assurance that government responses to the disruptions in the financial
markets or to weakening economies will restore confidence, stabilize markets or increase liquidity
and the availability of credit. These conditions may reduce the willingness or ability of our
customers and prospective customers to commit funds to purchase our products and services, or their
ability to pay for our products and services after purchase.
We may not be able to continue to successfully compete with other companies. We compete in
markets that are intensely competitive and are expected to become more competitive as current
competitors expand their product offerings. Our current competitors come from many segments of the
software industry and offer a variety of solutions directed at various aspects of the extended
supply chain, as well as the enterprise as a whole. We face competition for product sales from:
| the corporate information technology departments of current or potential customers capable of internally developing solutions; | ||
| Enterprise Resource Planning (ERP) vendors, including Oracle, SAP, and Infor, among others; | ||
| supply chain execution vendors, including RedPrairie Holding, Inc., HighJump Software Inc., and CDC Software Corporation, among others; | ||
| supply chain planning vendors, including JDA Software Group, Inc., and SAS Institute Inc., among others; and | ||
| smaller independent companies that have developed or are attempting to develop supply chain execution solutions and/or supply chain planning solutions that competes with our Supply Chain Solutions. |
We anticipate facing increased competition from ERP and Supply Chain Management (SCM)
applications vendors and business application software vendors that may broaden their solution
offerings by internally developing or by acquiring or partnering with independent developers of
supply chain planning and execution software. Compared with us, some of these ERP and SCM companies
and other potential competitors have longer operating histories; significantly more financial,
technical, marketing and other resources; greater name recognition; broader solutions; and larger
installed bases of customers. To the extent that ERP and SCM vendors or other large competitors
develop or acquire systems with functionality comparable or superior to ours, their larger customer
bases, long-standing customer relationships, and ability to offer broader solutions outside the
scope of supply chain could create significant competitive advantage for them. It also is possible
that new competitors or alliances among current and/or new competitors could emerge to win
significant market share. Increased competition could result in price reductions, fewer customer
orders, reduced earnings and margins and loss of market share. In turn, this could have a material
adverse effect on our business, results of operations, cash flow, and financial condition.
We believe that the domain expertise required to continually innovate targeted supply chain
technology, effectively and efficiently implement solutions, identify and attract sales
opportunities, and compete successfully in the sales cycle provides us with a competitive advantage
and is a significant barrier to market entry. However, in order to be successful in the future, we
must continue to respond promptly and effectively to technological change and competitors
innovations, and consequently we cannot assure you that we will not be required to make substantial
additional investments in connection with our research, development, marketing, sales and customer
service efforts in order to meet any competitive threat, or that we will be able to compete
successfully in the future. Some of our competitors have significant resources at their disposal,
and the degree to which we will compete with these new products in the marketplace is still
undetermined.
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Our operating results are substantially dependent on one line of business. We continue to
derive our revenues from sales of our SCM solutions software and related services and hardware. Any
factor adversely affecting the markets for SCM solutions could have an adverse effect on our
business, results of operations, cash flow and financial condition. Accordingly, our future
operating results will depend on the demand for our SCM products and related services and hardware
by our customers, including new and enhanced releases that we subsequently introduce. We cannot
assure you that the market will continue to demand our current products or that we will be
successful in marketing any new or enhanced products. If our competitors release new products that
are superior to our products in performance or price, demand for our products may decline. A
decline in demand for our products as a result of competition, technological change or other
factors would reduce our total revenues and harm our ability to maintain profitability.
Our operating results are difficult to predict and could cause our stock price to fall. Our
quarterly revenue and operating results are difficult to predict and can fluctuate significantly
from quarter to quarter. If our quarterly revenue or operating results fall below the expectations
of investors or public market analysts, the price of our common stock could fall substantially. Our
quarterly revenue is difficult to forecast for several reasons, including the following: global
macro-economic disruptions, credit and equity market disruptions which can significantly impact
capital availability and spend timing, the varying sales cycle for our products and services from
customer to customer, including multiple levels of authorization required by some customers; the
varying demand for our products; customers budgeting and purchasing cycles; potential deferral of
license revenue well after entering into a license agreement due to extended payment terms,
significant software modifications, future software functionality deliverables or other negotiated
terms that preclude software revenue recognition under U.S. general accepted accounting principles;
delays in our implementations at customer sites; timing of hiring new services employees and the
rate at which these employees become productive; timing of introduction of new products;
development and performance of our distribution channels; and timing of any acquisitions and
related costs.
As a result of these and other factors, our license revenue is difficult to predict. Because
our revenue from services is largely correlated to our license revenue, a decline in license
revenue could also cause a decline in our services revenue in the same quarter or in subsequent
quarters. In addition, an increase or decrease in hardware sales, which provide us with lower gross
margins than sales of software licenses or services, may cause variations in our quarterly
operating results.
Most of our expenses, including employee compensation and rent, are relatively fixed. In
addition, our expense levels are based, in part, on our expectations regarding future revenue
increases. As a result, any shortfall in revenue in relation to our expectations could cause
significant changes in our operating results from quarter to quarter and could result in quarterly
losses. As a result of these factors, we believe that period-to-period comparisons of our revenue
levels and operating results are not necessarily meaningful. Historical growth rates may not be a
good indicator of future operating results. You should not rely on our historical quarterly revenue
and operating results to predict our future performance.
Our future revenue is dependent upon continuing license sales which in turn drives sales of
post-contract support and professional services. We are dependent on our new customers as well as
our large installed customer base to purchase additional software licenses, post-contract support
and professional services from us. Our post-contract support agreements are generally for a
one-year term and our professional services agreements generally only cover a particular
engagement. In future periods customers may not license additional products, and in turn may not
renew post-contract support agreements or purchase additional professional services from us. If our
customers decide not to license or purchase these products and services from us, or if they reduce
the scope of their post-contract support or hosting or professional services agreements, our
revenue could decrease, significantly having a material adverse effect on our business, results of
operations, cash flow and financial condition.
In addition, many of our customers are using older versions of our products for which we are
no longer developing any further upgrades or enhancements. While we intend to migrate our
customers who are using these versions to newer versions or products, there can be no assurance
that these customers will do so. If customers using older versions of our products decide not to
license our current software products, or decide to discontinue the use of our products and
associated post-contract support services, our revenue could decrease and our operating results
could be materially adversely affected.
We encounter long sales cycles, particularly with our larger customers, which could have an
adverse effect on the amount, timing and predictability of our revenue, adversely affecting our
business, results of operations, cash flow and financial condition. Our products have lengthy
sales cycles, which typically extend from six to twelve months and may take up to several years.
Potential and existing customers, particularly larger enterprise customers, often commit
significant resources to an evaluation of available solutions and services and require us to expend
substantial time and resources in connection with our sales efforts. The length of our sales
cycles also varies depending on the type of customer to which we are selling, the product being
sold and customer requirements. We may incur substantial sales and marketing expenses and expend
significant management effort during
this time, regardless of whether we make a sale. Many of the key risks relating to sales
processes are beyond our control, including: our customers budgetary and scheduling constraints;
the timing of our customers budget cycles and approval processes; our customers willingness to
replace their currently deployed software solutions; and general economic conditions.
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As a result of these lengthy and uncertain sales cycles of our products and services, it is
difficult for us to predict when customers may purchase products or services from us, thereby
affecting when we can recognize the associated revenue, and our operating results may vary
significantly and may be adversely affected. The length of our sales cycle makes us susceptible to
having pending transactions delayed or terminated by our customers if they decide to delay or
withdraw funding for IT projects. Our customers may decide to delay or withdraw funding for IT
projects for various reasons, including, but not limited to, global economic cycles and capital
market fluctuations.
Delays in implementations of our products could adversely impact us. Due to the size of most
of our software implementations, our implementation cycle can be lengthy and may result in delays.
Our products may require modification or customization and must integrate with many existing
computer systems and software programs of our customers. This can be time-consuming and expensive
for customers and can result in implementation and deployment delays of our products. Additional
delays could result if we fail to attract, train and retain services personnel, or if our alliance
companies fail to commit sufficient resources towards implementing our software. These delays and
resulting customer dissatisfaction could limit our future sales opportunities, impact revenue and
harm our reputation.
Our pricing models may need to be modified due to price competition. The competitive markets
in which we operate may oblige us to reduce our prices in order to contend with the pricing models
of our competitors. If our competitors discount certain products or services, we may choose to
lower prices on certain products or services in order to attract or retain customers. Any such
price modifications would likely reduce margins and could adversely affect our business, results of
operations, cash flow and financial condition.
Our ability to license our software is highly dependent on the quality of our services
offerings, and our failure to offer high quality services could adversely affect our software
licensing revenue and results of operations. Most of our customers rely to some extent on our
professional services to aid in the implementation of our software solutions. Once our software
has been installed and deployed, our customers may depend on us to provide them with ongoing
support and resolution of issues relating to our software. Therefore, a high level of service is
critical for the continued marketing and sale of our solutions. If we or our partners do not
efficiently and effectively install and deploy our software products, or succeed in helping our
customers quickly resolve post-deployment issues, our ability to sell software products to these
customers would be adversely affected and our reputation in the marketplace and with potential
customers could suffer. In turn, our business, results of operations, cash flow and financial
condition could be materially adversely affected.
Our failure to manage the growth of our operations may adversely affect our business, results
of operations, cash flow and financial condition. We plan to continue to increase the scope of our
operations domestically and internationally. This growth may place a significant strain on our
management systems and resources. We may further expand domestically or internationally through
internal growth or through acquisitions of related companies and technologies. For us to
effectively manage our growth, we must continue to: maintain continuity in our executive officers;
develop the management skills of our managers and supervisors; attract, retain, train and motivate
our employees; improve our operational, financial and management controls; improve our reporting
systems and procedures; and enhance management and information control systems.
Our international operations have many associated risks. We continue to strategically manage
our presence in international markets, and these efforts require significant management attention
and financial resources. We may not be able to successfully penetrate international markets or if
we do, there can be no assurance that we will grow our business in these markets at the same rate
as in North America. Because of these inherent complexities and challenges, it could adversely
affect our business, results of operations, cash flow and financial condition.
We have international offices in Europe: United Kingdom, Netherlands and France and in Asia:
China, Japan, Singapore and Australia. Our expansion into international markets largely began in
2002. Prior to 2002, our international presence was in the United Kingdom and the Netherlands. We
have committed resources to establishing and maintaining the international sales offices and the
expansion of international sales and support channels in key international markets. Our efforts to
develop and expand international sales and support channels may not be successful. International
sales are subject to many risks and difficulties, including those arising from the following:
building and maintaining a competitive presence in new markets; staffing and managing foreign
operations; managing international systems integrators; complying with a variety of foreign laws;
producing localized versions of our products;
import and export restrictions and tariffs; enforcing contracts and collecting accounts receivable;
unexpected changes in regulatory requirements; reduced protection for intellectual property rights
in some countries; potential adverse tax treatment; less stringent adherence to ethical and legal
standards by prospective customers in some countries; language and cultural barriers; currency
fluctuations; political and economic instability abroad; and seasonal fluctuations may arise from
the lower sales that typically occur during the summer months in Europe and other parts of the
world.
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Our operating results may include foreign currency gains and losses. Due to our international
operations, we conduct a portion of our business in currencies other than the United States dollar.
Our revenues, expenses, operating profit and net income are affected when the dollar weakens or
strengthens in relation to other currencies. In addition, we have a large development center in
Bangalore, India that does not have a natural in market revenue hedge to mitigate currency risk to
our operating expense in India. Fluctuations in the value of other currencies, particularly the
Indian rupee on expenses, could significantly affect our revenues, expenses, operating profit and
net income.
Fluctuations in our hardware sales may adversely affect us. A portion of our revenue in any
period is comprised of the resale of a variety of third-party hardware products to purchasers of
our software. Our customers may choose to purchase this hardware directly from manufacturers or
distributors of these products. We view sales of hardware as non-strategic. We perform this service
to our customers seeking a single source for their supply chain execution needs. Hardware sales are
difficult to forecast and fluctuate from quarter to quarter, leading to unusual comparisons of
total revenue and fluctuations in profits. If we are not able to increase our revenue from software
licenses and services or maintain our hardware revenue, our business, results of operations, cash
flow and financial condition may be adversely affected.
Our technology must be advanced if we are to remain competitive. The market for our products
is characterized by rapid technological change, frequent new product introductions and
enhancements, changes in customer demands and evolving industry standards. Our existing products
could be rendered obsolete if we fail to continue to advance our technology. We have also found
that the technological life cycles of our products are difficult to estimate, partially because of
changing demands of other participants in the supply chain. We believe that our future success will
depend upon our ability to continue to enhance our current product line while we concurrently
develop and introduce new products that keep pace with competitive and technological developments.
These developments require us to continue to make substantial product development investments.
Although we are presently developing a number of product enhancements to our product sets, we
cannot assure you that these enhancements will be completed on a timely basis or gain customer
acceptance.
Our research and development activities may not generate significant returns. Developing our
products and software is costly, and recovering our investment in product development may take a
lengthy amount of time, if it occurs at all. We anticipate continuing to make significant
investments in software research and development and related product opportunities because we
believe that we must continue to allocate a significant amount of resources to our research and
development activities in order to compete successfully. We cannot estimate with any certainty when
we will, if ever, receive significant revenues from these investments.
Our liability to clients may be substantial if our systems fail. Our products are often
critical to the operations of our customers businesses and provide benefits that may be difficult
to quantify. If our products fail to function as required, we may be subject to claims for
substantial damages. Courts may not enforce provisions in our contracts that would limit our
liability or otherwise protect us from liability for damages. Defending a lawsuit, regardless of
its merit, could be costly and divert managements time and attention. Although we maintain general
liability insurance coverage, including coverage for errors or omissions, this coverage may not
continue to be available on reasonable terms or in sufficient amounts to cover claims against us.
In addition, our insurer may disclaim coverage as to any future claim. If claims exceeding the
available insurance coverage are successfully asserted against us, or our insurer imposes premium
increases, large deductibles or co-insurance requirements on us, our business, results of
operations, cash flow and financial condition could be adversely affected.
We incorporate third-party software in our solutions, the failure or unavailability of which
could adversely affect our ability to sell, support and service our products. We incorporate and
include third-party software into and with certain of our products and solutions and expect to
continue to do so. The operation of our products could be impaired if errors occur in the
third-party software that we use. It may be more difficult for us to correct any defects in
third-party software because the development and maintenance of the software is not within our
control. Accordingly, our business could be adversely affected in the event of any errors in this
software.
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In addition, there can be no assurance that these third parties will continue to make their
software available to us on acceptable terms, or at all; not make their products available to our
competitors on more favorable terms; invest the appropriate levels of resources in their products
and services to maintain and enhance the capabilities of their software; or remain in business. Any
impairment in our relationship with these third parties or our ability to license or otherwise use
their software could have a material adverse effect on our business, results of operations, cash
flow and financial condition.
The use of open source software in our products may expose us to additional risks and harm our
intellectual property. Some of our products use or incorporate software that is subject to one or
more open source licenses. Open source software is typically freely accessible, usable and
modifiable. Certain open source software licenses require a user who intends to distribute the open
source software as a component of the users software to disclose publicly part or all of the
source code to the users software. In addition, certain open source software licenses require the
user of such software to make any derivative works of the open source code available to others on
unfavorable terms or at no cost. This can subject previously proprietary software to open source
license terms.
While we monitor the use of all open source software in our products, processes and technology
and try to ensure that no open source software is used in such a way as to require us to disclose
the source code to the related product or solution, such use could inadvertently occur.
Additionally, if a third-party software provider has incorporated certain types of open source
software into software we license from such third party for our products and solutions, we could,
under certain circumstances, be required to disclose the source code to our products and solutions.
This could harm our intellectual property position and have a material adverse effect on our
business, results of operations, cash flow and financial condition.
If we are unable to develop software applications that interoperate with computing platforms
developed by others, our business, results of operations, cash flow and financial condition may be
adversely affected. We develop software applications that interoperate with operating
systems, database platforms and hardware devices developed by others, which we refer to
collectively as computing platforms. If the developers of these computing platforms do not
cooperate with us or we are unable to devote the necessary resources so that our applications
interoperate with those computing platforms, our software development efforts may be delayed and
our business and results of operations may be adversely affected. When new or updated versions of
these computing platforms are introduced, it is often necessary for us to develop updated versions
of our software applications so that they interoperate properly with these computing platforms. We
may not accomplish these development efforts quickly or cost-effectively, and it is difficult to
predict what the relative growth rates of adoption of these computing platforms will be. These
development efforts require substantial investment, the devotion of substantial employee resources
and the cooperation of the developers of the computing platforms. For some computing platforms, we
must obtain some proprietary application program interfaces from the owner in order to develop
software applications that interoperate with the computing platforms. Computing platform providers
have no obligation to assist in these development efforts. If they do not provide us with
assistance or the necessary proprietary application program interfaces on a timely basis, we may
experience delays or be unable to expand our software applications into other areas.
The computing platforms we use may not continue to be available to us on commercially
reasonable terms. Any loss of the right to use any of these systems could result in delays in the
provision of our products and services and our results of operations may be adversely affected.
Defects in computing platforms could result in errors or a failure of our products which could harm
our business.
Our software may contain undetected errors or bugs, resulting in harm to our reputation and
operating results. Software products as complex as those offered by us might contain undetected
errors or failures when first introduced or when new versions are released. We cannot assure you,
despite testing by us and by current and prospective customers that errors will not be found in new
products or product enhancements after commercial release. Any errors found could cause substantial
harm to our reputation, result in additional unplanned expenses to remedy any defects, delay the
introduction of new products, result in the loss of existing or potential customers and/or cause a
loss in revenue. Further, such errors could subject us to claims from our customers for significant
damages, and we cannot assure you that courts would enforce the provisions in our customer
agreements that limit our liability for damages. In turn, our business, results of operations,
cash flow and financial condition could be materially adversely affected.
Our business may require additional capital. We may require additional capital to finance our
growth or to fund acquisitions or investments in complementary businesses, technologies or product
lines. Our capital requirements may be impacted by many factors, including: demand for our
products; the timing of and extent to which we invest in new technology; the timing of and extent
to which we acquire other companies; the level and timing of revenue; the expenses of sales and
marketing and new product development; the success and related expense of increasing our brand
awareness; the cost of facilities to accommodate a growing
workforce; the extent to which competitors are successful in developing new products and
increasing their market share; and the costs involved in maintaining and enforcing intellectual
property rights.
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To the extent that our resources are insufficient to fund our future activities, we may need
to raise additional funds through public or private financing. However, additional funding, if
needed, may not be available on terms attractive to us, or at all. In addition, since we have
historically financed our growth through cash flow from operations and available cash, our relative
inexperience in accessing the credit or capital markets may impair our ability to do so if the need
arises. Our inability to raise capital when needed could have a material adverse effect on our
business, results of operations, cash flow and financial condition. If additional funds are raised
through the issuance of equity securities, the percentage ownership of our company held by our
current shareholders would be diluted.
Our inability to attract, integrate and retain management and other personnel may adversely
affect us. Our success greatly depends on the continued service of our executives, as well as our
other key senior management, technical and sales personnel. Our success will depend on the ability
of our executive officers to work together as a team. The loss of any of our senior management or
other key professional services, research and development, sales and marketing
personnelparticularly if they are lost to competitorscould impair our ability to grow our
business. We do not maintain key man life insurance on any of our executive officers.
Our future success will depend in large part upon our ability to attract, retain and motivate
highly skilled employees. We face significant competition for individuals with the skills required
to perform the services we offer, and thus we may encounter increased compensation costs that are
not offset by increased revenue. We cannot assure you that we will be able to attract and retain
sufficient numbers of these highly skilled employees or to motivate them. Because of the complexity
of the SCM market, we may experience a significant time lag between the date on which technical and
sales personnel are hired and the time at which these persons become fully productive.
Our growth is dependent upon the successful development of our direct and indirect sales
channel mix. We believe that our future growth also will depend on developing and maintaining a
successful direct sales force and strategic relationships with systems integrators and other
technology companies. Our strategy is to continue to increase the proportion of customers served
through direct and indirect channels. We are currently investing, and plan to continue to invest,
significant resources to develop our sales channels. This investment could adversely affect our
operating results if these efforts do not generate license and service revenue necessary to offset
this investment. Also, our inability to partner with other technology companies and qualified
systems integrators could adversely affect our results of operations. Because lower unit prices are
typically charged on sales made through indirect channels, increased indirect sales
disproportionate to direct sales could reduce our average selling prices and result in lower gross
margins and earnings. In addition, sales of our products through indirect channels will reduce our
consulting service revenues, as the third-party systems integrators provide these services. As
indirect sales increase, our direct contact with our customer base will decrease, and we may have
more difficulty accurately forecasting sales, evaluating customer satisfaction and recognizing
emerging customer requirements. In addition, these systems integrators and third-party software
providers may develop, acquire or market products competitive with our products.
Our strategy of marketing our products directly to customers and indirectly through systems
integrators and other technology companies may result in distribution channel conflicts. Our direct
sales efforts may compete with those of our indirect channels and, to the extent different systems
integrators target the same customers, systems integrators may also come into conflict with each
other. Any channel conflicts that develop may have a material adverse effect on our relationships
with systems integrators or harm our ability to attract new systems integrators.
Our employee retention and hiring may be hindered by immigration restrictions. Foreign
nationals who are not U.S. citizens or permanent residents constitute a significant part of our
professional U.S. workforce. Our ability to hire and retain these workers, and their ability to
remain and work in the U.S. are impacted by laws and regulations as well as by processing
procedures of various government agencies. Changes in laws, regulations or procedures may adversely
affect our ability to hire or retain such workers and may affect our costs of doing business and/or
our ability to deliver services.
Our failure to adequately protect our proprietary rights may adversely affect us. Our success
and ability to compete is dependent in part upon our proprietary technology. We cannot assure you
that we will be able to protect our proprietary rights against unauthorized third-party copying or
use. We rely on a combination of copyright, trademark and trade secret laws, as well as
confidentiality agreements, licensing arrangements, and contractual commitments, to establish and
protect our proprietary rights. Despite our efforts to protect our proprietary rights, existing
copyright, trademark and trade secret laws afford only limited protection.
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In addition, the laws of certain foreign countries do not protect our rights to the same extent, as
do the laws of the United States. Attempts may be made to copy or reverse engineer aspects of our
products or to obtain and use information that we regard as proprietary. Any infringement of our
proprietary rights could negatively impact our future operating results. Furthermore, policing the
unauthorized use of our products is difficult, and litigation may be necessary in the future to
enforce our intellectual property rights, to protect our trade secrets or to determine the validity
and scope of the proprietary rights of others. Litigation could result in substantial costs and
diversion of resources. In turn, our business, results of operations, cash flow and financial
condition could be materially adversely affected.
Our liability for intellectual property claims can be costly and result in the loss of
significant rights. It is possible that third parties will claim that we have infringed their
current or future products. We expect that SCM software developers like us will increasingly be
subject to infringement claims as the number of products grows. Any claims, with or without merit,
could be time-consuming, result in costly litigation, cause product shipment delays or require us
to pay monetary damages or to enter into royalty or licensing agreements, any of which could
negatively impact our operating results. We cannot assure you that these royalty or licensing
agreements, if required, would be available on terms acceptable to us, if at all. We also may be
required to indemnify our customers for damages they suffer as a result of such infringement. We
cannot assure you that legal action claiming patent infringement will not be commenced against us,
or that we would prevail in litigation given the complex technical issues and inherent
uncertainties in patent litigation. If a patent claim against us was successful and we could not
obtain a license on acceptable terms or license a substitute technology or redesign to avoid
infringement, we may be prevented from distributing our software or required to incur significant
expense and delay in developing non-infringing software. Any of these events could seriously harm
our business, results of operations, cash flow and financial condition.
Mergers or other strategic transactions involving our competitors could weaken our competitive
position or reduce our revenue. Our competitors have been consolidating, which may make them more
formidable competitors to us. Competing with stronger companies may cause us to experience pricing
pressure and loss of market share, either of which could have a material adverse effect on our
business, results of operations, cash flow and financial condition. Our competitors may establish
or strengthen their cooperative relationships with vendors, systems integrators, third-party
consulting firms or other parties. Established companies may not only develop their own products
but may also acquire or partner with our current competitors. If any of these events occur, our
revenue and profitability could significantly decline.
Our business, results of operations, cash flow and financial condition may be adversely
affected if we cannot integrate acquired companies or manage joint ventures. We may from time to
time acquire companies with complementary products and services. These acquisitions will expose us
to increased risks and costs, including those arising from the following: assimilating new
operations and personnel; diverting financial and management resources from existing operations;
and integrating acquired technologies. We may not be able to generate sufficient revenue from any
of these acquisitions to offset the associated acquisition costs.
We will also be required to maintain uniform standards of quality and service, controls,
procedures and policies. Our failure to achieve any of these standards may hurt relationships with
customers, employees and new management personnel. In addition, future acquisitions may result in
additional issuances of stock that could be dilutive to our shareholders.
Many acquisition candidates have significant intangible assets, and an acquisition of these
businesses would likely result in significant amounts of goodwill and other intangible assets.
Goodwill and certain other intangible assets are not amortized to income, but are subject to at
least annual impairment reviews. If the acquisitions do not perform as planned, future charges to
income arising from such impairment reviews could be significant. Likewise, future quarterly and
annual earnings could be significantly adversely affected. In addition, these acquisitions could
involve acquisition-related charges, such as one-time acquired research and development charges.
We may also evaluate joint venture relationships with complementary businesses. Any joint
venture we enter into would involve many of the same risks posed by acquisitions, particularly the
following: risks associated with the diversion of resources; the inability to generate sufficient
revenue; the management of relationships with third parties; and potential additional expenses.
Our stock price has been highly volatile. The trading price of our common stock has fluctuated
significantly since our initial public offering in April 1998. In addition, the trading price of
our common stock could be subject to wide fluctuations in response to various factors, including:
global macro-economic contraction impacting demand for SCM solutions; quarterly variations in
operating results; announcements of technological innovations or new products by us or our
competitors; developments with respect
to patents or proprietary rights; changes in financial estimates by securities analysts; and
mergers, acquisitions and combinations involving our competitors or us.
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In addition, the stock market has recently experienced volatility that has particularly
affected the market prices of equity securities of many technology companies and that often has
been unrelated or disproportionate to the operating performance of these companies. These broad
market fluctuations may adversely affect the market price of our common stock.
Our articles of incorporation and bylaws and Georgia law may inhibit a takeover of our
company. Our basic corporate documents and Georgia law contain provisions that might enable our
management to resist a takeover of our company. These provisions might discourage, delay or prevent
a change in the control of our company or a change in our management. These provisions could also
discourage proxy contests and make it more difficult for you and other shareholders to elect
directors and take other corporate actions. The existence of these provisions could also limit the
price that investors might be willing to pay in the future for shares of our common stock.
Item 1B. | Unresolved Staff Comments |
As of December 31, 2010, we do not have any unresolved SEC staff comments.
Item 2. | Properties |
Our principal administrative, sales, marketing, support and research and development facility
is located in approximately 184,000 square feet of modern office space in Atlanta, Georgia.
Substantially all of this space is leased to us through September 30, 2018. We have additional
offices under multi-year agreements in Indiana. We also occupy facilities outside of the United
States under multi-year agreements in the United Kingdom, the Netherlands, France, China, Japan,
Singapore, India and Australia. We also occupy offices under short-term agreements in other
geographical regions. We believe our office space is adequate to meet our immediate needs; however,
we may expand into additional facilities in the future.
Item 3. | Legal Proceedings |
From time to time, we are party to various legal proceedings arising in the ordinary course of
business. The Company is not currently a party to any other legal proceeding the result of which it
believes could have a material adverse impact upon its business, financial position or results of
operations.
Many of our installations involve products that are critical to the operations of our clients
businesses. Any failure in our products could result in a claim for substantial damages against us,
regardless of our responsibility for such failure. Although we attempt to limit contractually our
liability for damages arising from product failures or negligent acts or omissions, there can be no
assurance the limitations of liability set forth in our contracts will be enforceable in all
instances.
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PART II
Item 5. | Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities |
Market for Common Stock
Our common stock is traded on the Nasdaq Global Select Market under the symbol MANH. The
following table sets forth the high and low closing sales prices of the common stock as reported by
the Nasdaq Global Select Market for the periods indicated:
Fiscal Period | High Price | Low Price | ||||||
2010 |
||||||||
First Quarter |
$ | 27.46 | $ | 20.97 | ||||
Second Quarter |
30.92 | 25.59 | ||||||
Third Quarter |
29.72 | 25.23 | ||||||
Fourth Quarter |
31.99 | 28.56 | ||||||
2009 |
||||||||
First Quarter |
$ | 17.32 | $ | 13.98 | ||||
Second Quarter |
19.18 | 14.21 | ||||||
Third Quarter |
20.42 | 15.42 | ||||||
Fourth Quarter |
24.88 | 19.83 |
On February 16, 2011, the last reported sales price of our common stock on the Nasdaq Global
Select Market was $31.30 per share. The number of shareholders of record of our common stock as of
February 16, 2011 was approximately 25.
We do not intend to declare or pay cash dividends in the foreseeable future. Our management
anticipates that all earnings and other cash resources, if any, will be retained for investment in
our business.
Equity Compensation Plan Information
The following table provides information regarding our current equity compensation plans as of
December 31, 2010:
Number of securities to | Weighted-average | Number of securities | ||||||||||
be issued upon exercise | exercise price of | remaining available for | ||||||||||
of outstanding options | outstanding options | future issuance under | ||||||||||
Plan Category | and rights | and rights | equity compensation plans | |||||||||
Equity compensation plans approved by security holders |
4,504,408 | $ | 21.39 | 1,594,226 | ||||||||
Equity compensation plans not approved by security
holders |
| | | |||||||||
Total |
4,504,408 | $ | 21.39 | 1,594,226 | ||||||||
Additional information regarding our equity compensation plans can be found in Note 2 of
the Notes to our Consolidated Financial Statements.
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Purchase of Equity Securities
The following table provides information regarding our common stock repurchases under our
publicly-announced repurchase program and shares withheld for taxes due upon vesting of restricted
stock for the quarter ended December 31, 2010. All repurchases related to the repurchase program
were made on the open market.
Total Number of | Maximum Number (or | |||||||||||||||
Shares Purchased as | Approximate Dollar Value) | |||||||||||||||
Total Number | Average Price | Part of Publicly | of Shares that May Yet Be | |||||||||||||
of Shares | Paid per | Announced Plans or | Purchased Under the Plans | |||||||||||||
Period | Purchased(a) | Share(b) | Programs | or Programs | ||||||||||||
October 1 October 31, 2010 |
92,182 | $ | 30.22 | 89,071 | $ | 22,305,089 | ||||||||||
November 1 November 30, 2010 |
494,215 | 30.89 | 494,150 | 7,038,567 | ||||||||||||
December 1 December 31, 2010 |
97,513 | 31.66 | 96,701 | 3,977,024 | ||||||||||||
Total |
683,910 | $ | 30.91 | 679,922 | $ | 3,977,024 | ||||||||||
(a) | Includes 3,111 shares, 65 shares and 812 shares withheld for taxes due upon vesting of restricted stock during October, November and December, respectively. | |
(b) | The average price paid per share for shares withheld for taxes due upon vesting of restricted stock was $29.13, $30.81 and $31.64 in October, November and December, respectively. |
During the year ended December 31, 2010, we repurchased a total of 2,716,621 shares at an
average price per share of $28.15 under our publicly-announced buy-back program. In January 2011,
our Board of Directors approved raising our remaining share repurchase authority from $4.0 million
to $50.0 million of Manhattan Associates outstanding common stock.
Item 6. | Selected Financial Data |
You should read the following selected consolidated financial data in conjunction with our
Consolidated Financial Statements and related Notes thereto and with Managements Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere in this Form 10-K.
The statement of income data for the years ended December 31, 2010, 2009 and 2008, and the balance
sheet data as of December 31, 2010 and 2009, are derived from, and are qualified by reference to,
the audited financial statements included elsewhere in this Form 10-K. The statement of income data
for the years ended December 31, 2007 and 2006 and the balance sheet data as of December 31, 2008,
2007, and 2006 are derived from audited financial statements not included herein. Historical
results are not necessarily indicative of results to be expected in the future.
Year Ended December 31, | ||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||
Statement of Income Data: |
||||||||||||||||||||
Software license |
$ | 66,543 | $ | 73,031 | $ | 65,313 | $ | 34,686 | $ | 54,450 | ||||||||||
Total revenue |
$ | 288,868 | $ | 337,401 | $ | 337,201 | $ | 246,667 | $ | 297,117 | ||||||||||
Operating income |
$ | 30,755 | $ | 43,058 | $ | 25,963 | $ | 21,142 | $ | 41,927 | ||||||||||
Net income |
$ | 19,331 | $ | 30,751 | $ | 22,798 | $ | 16,562 | $ | 28,061 | ||||||||||
Earnings per diluted share |
$ | 0.69 | $ | 1.13 | $ | 0.94 | $ | 0.73 | $ | 1.25 |
December 31, | ||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | 2010 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance Sheet Data: |
||||||||||||||||||||
Cash, cash equivalents and investments |
$ | 131,057 | $ | 72,772 | $ | 88,706 | $ | 123,014 | $ | 126,869 | ||||||||||
Total assets |
$ | 314,893 | $ | 271,660 | $ | 270,221 | $ | 264,711 | $ | 280,464 | ||||||||||
Shareholders equity |
$ | 237,140 | $ | 185,705 | $ | 179,839 | $ | 183,365 | $ | 183,800 |
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Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
All statements, trend analyses and other information contained in the following
discussion relative to markets for our products and trends in revenue, gross margins and
anticipated expense levels, as well as other statements including words such as anticipate,
believe, plan, estimate, expect, and intend and other similar expressions constitute
forward-looking statements. These forward-looking statements are subject to business and economic
risks and uncertainties, including those discussed under the caption Risk Factors in Item 1A of
this Form 10-K, and our actual results of operations may differ materially from those contained in
the forward-looking statements.
Business Overview
We are a leading developer and implementer of supply chain software solutions
that help organizations optimize their supply chain operations from planning through execution.
Our platform-based supply chain software solution portfolios Manhattan SCOPE® and
Manhattan SCALETM are designed to deliver both business agility and total cost of
ownership advantages to customers. Manhattan SCOPE (Supply Chain Optimization, Planning through
Execution) leverages our Supply Chain Process Platform (SCPP) to unify the full breadth of the
supply chain, while Manhattan SCALE (Supply Chain Architected for Logistics Execution) leverages
Microsofts .NET® platform to unify logistics functions.
Early in the Companys history, our offerings were heavily focused on warehouse management
solutions. As the Company grew in size and scope, our offerings expanded across the entire supply
chain. As a result of the Companys historical beginnings however, we still enjoy significant
presence in, and a relatively strong concentration of revenues from, warehouse management
solutions, which are a component of our distribution management solution suite. Over time, as our
non-warehouse management solutions have proliferated and increased in capability, the Companys
revenue concentration in its warehouse management solutions has correspondingly decreased.
Our business model is singularly focused on the development and implementation of complex
supply chain software solutions that are designed to optimize supply chain effectiveness and
efficiency for our customers. We have three principal sources of revenue:
| license revenue generated from the sales of our supply chain software; | ||
| professional services derived from implementing our solutions along with customer support services and software enhancements (services); and | ||
| hardware sales and other revenue. |
In 2010, we generated $297.1 million in total revenue, with a revenue mix of: license
revenues 18%; services 72%; and hardware and other revenue 10%.
We manage our business based on three geographic regions: North America and Latin America
(Americas), Europe, Middle East and Africa (EMEA), and Asia Pacific (APAC). Geographic revenue is
based on the location of the sale. Our international revenue was approximately $80.7 million,
$58.0 million and $81.5 million for the years ended December 31, 2010, 2009 and 2008, respectively,
which represents approximately 27%, 24% and 24% of our total revenue for the years ended December
31, 2010, 2009 and 2008, respectively. International revenue includes all revenue derived from
sales to customers outside the United States. At December 31, 2010, we employed approximately
1,925 employees worldwide, of which approximately 950 employees are based in the Americas,
approximately 140 employees in EMEA, and approximately 835 employees in APAC and India. We have
offices in Australia, China, France, India, Japan, the Netherlands, Singapore and the United
Kingdom, as well as representatives in Mexico and reseller partnerships in Latin America, Eastern
Europe, the Middle East, South Africa and Asia.
Global Economic Trends and Industry Factors
Global macro economic trends, technology spending and supply chain management market growth
are important barometers for our business. In 2010, approximately 73% of our total revenue was
generated in the United States, 11% in EMEA and the balance in APAC, Canada and Latin America. In
addition, industry analysts estimate that approximately two-thirds of every supply chain software
solutions dollar invested is spent in the United States; consequently, the health of the U.S.
economy has a meaningful impact on our financial results.
We sell technology-based solutions with total pricing, including software and services, in
many cases exceeding $1.0 million. Reductions in capital budgets of our customers and prospective
customers have had an adverse impact on our ability to sell our solutions. The concerns over the
slow economic recovery within the United States and geographic regions in which we operate
continues to affect customers and prospects decisions regarding timing of strategic capital spend.
Timing of deals closed can have a material adverse impact on our business and is likely to further
intensify competition in our already highly competitive markets.
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In January 2011, the International Monetary Fund (IMF) provided a World Economic Outlook (WEO)
update raising its previous 2011 world economic growth forecast from October 2010. The update
noted that, global output is projected to expand by 41/2 percent in 2011, an upward revision of
about 1/4 percentage point relative to the October 2010 WEO. This reflects stronger-than-
expected activity in the second half of 2010 as well as new policy initiatives in the United
States that will boost activity this year. But downside risks to the recovery remain elevated.
Advanced economies, which represent our primary revenue markets, are projected to expand sluggishly
through 2011 and 2012 with annual growth of approximately 2.5%.
In 2009, we recognized five license deals greater than $1.0 million. In contrast, in 2010, we
recognized nine license deals greater than $1.0 million and view this as a positive sign the
economy is continuing to stabilize and customers and prospects are beginning to more actively plan
for supply chain investment. While our 2010 results signal improving demand, we experienced second
half slow down in license deals closed over $1.0 million due to continued macro-economic turbulence
and uncertainty in the United States and Western Europe. As a result, we and our customers still
remain cautious regarding the global economic recovery as noted by IMFs World Economic Outlook.
When reviewing our 2010 results compared to 2009 it is important to highlight temporary
expense actions instituted in 2009 to offset the impact of the global economic crisis on our
revenue. During 2009 we had no annual merit salary increases, our executives and Board of
Directors absorbed a salary reduction, we asked many of our employees to take unpaid furlough days
and we dramatically reduced many other expenses to help offset a revenue decline versus 2008.
Moreover, due to poor financial results, 2009 incentive compensation was significantly reduced. In
2009, we had total revenue of $246.7 million for the full year, a 27% decline in total revenue
compared to the full year of 2008. Without sacrificing investment in innovation, our aggressive
measures to reduce costs enabled us to achieve $21.1 million in operating profit in 2009, with
positive operating margins of 8.6%. For 2010, we have restored executives and Board of Directors
salaries to pre-reduction levels, eliminated unpaid furlough days and provided merit increases to
our employees, among other actions, to ensure long-term success. We expect expense comparisons
will largely normalize in 2011 versus 2010.
In 2010, with improving macro-economic conditions, we achieved 20% total revenue growth,
representing a strong rebound from 2009. License revenue and services revenue increased 57% and
13%, respectively, for full year 2010 as compared to the same period in 2009 as a result of an
improving demand environment.
Revenue
License revenue: License revenue, a leading indicator of our business, is primarily
derived from software license fees that customers pay for supply chain solutions. In 2010, license
revenue totaled $54.5 million, or 18% of total revenue, with gross margins of 88.7%. For the year
ended December 31, 2010, Americas, EMEA and APAC recognized $44.3 million, $5.0 million, and $5.2
million in license revenue, respectively. Our annual license revenue percentage mix of new and
existing customers was approximately 30% and 70%, and over the past three years has averaged about
40% and 60%. We believe our mix of new customer to existing customer license sales is well
balanced, reflecting solid demand from our install base, as well as from new customers in a tough
macro-economic environment. License revenue growth is influenced by the strength of general
economic and business conditions and the competitive position of our software products. Our
license revenue generally has long sales cycles of which the timing of the closing of a few large
license transactions can have a material impact on our quarterly license revenues, operating
profit, operating margins and earnings per share. For example, $1.0 million of license revenue in
2010 equates to approximately three cents of diluted earnings per share impact.
Our software solutions are singularly focused on the supply chain planning and execution
markets, which are intensely competitive and characterized by rapid technological change. We are a
market leader in the supply chain management software solutions market as defined by industry
analysts such as AMR, ARC and Gartner. Our goal is to extend our position as a leading global
supply chain solutions provider by growing our license revenues faster than our competitors. We
expect to continue to face increased competition from ERP and SCM applications vendors and business
application software vendors that may broaden their solution offerings by internally developing or
by acquiring or partnering with independent developers of supply chain planning and execution
software. Increased competition could result in price reductions, fewer customer orders, reduced
gross margins and loss of market share.
Services revenue: Our services business consists of professional services (consulting and
training) and customer support services and software enhancements. In 2010, our services revenue
totaled $213.8 million, or 72% of total revenue, with gross margins of 53.8%. The Americas, EMEA
and APAC realized $176.9 million, $26.3 million, and $10.6 million, respectively, in services
revenue for the year ended December 31, 2010. Professional services accounted for over 60% of
total services revenue and approximately 45% of total revenue in 2010. When comparing our
operating margins to other technology companies, our consolidated operating margin profile can be
lower due to our large services revenue mix as a percentage of total revenue. While we
believe our services margins are very strong, they do lower our overall operating margin as
services margins are lower than license revenue margins.
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At December 31, 2010, our professional services organization totaled approximately 990
employees, accounting for 51% of our total employees worldwide. Our professional services
organization provides our customers with expertise and assistance in planning and implementing our
solutions. To ensure a successful product implementation, consultants assist customers with the
initial installation of a system, the conversion and transfer of the customers historical data
onto our system, and ongoing training, education and system upgrades. We believe our professional
services enable customers to implement our software rapidly, ensure the customers success with our
solution, strengthen our customer relationships, and add to our industry-specific knowledge base
for use in future implementations and product innovations.
Although our consulting services are optional, the majority of our customers use at least some
portion of these services for the implementation and ongoing support of our software solutions.
Consulting services are typically rendered under time and materials-based contracts with services
typically billed on an hourly basis. Professional services are sometimes rendered under fixed-fee
based contracts with payments due on specific dates or milestones.
Typically, our consulting services lag license revenue by several quarters, as implementation
services are performed after the purchase of the software. Services revenue growth is contingent
upon license revenue growth, which is influenced by the strength of general economic and business
conditions and the competitive position of our software products. In addition, our consulting
services business has competitive exposure to offshore providers and other consulting companies.
All of these factors potentially create the risk of pricing pressure, fewer customer orders,
reduced gross margins and loss of market share.
For customer support services and software enhancements (CSSE), we offer a comprehensive
program that provides our customers with software upgrades when and if available that offer
additional or improved functionality and technological advances incorporating emerging supply chain
and industry initiatives. We offer 24 hour customer support every day of the year plus software
upgrades for an annual fee that is paid in advance.
Our CSSE revenues totaled $81.9 million in 2010, representing approximately 40% of services
revenue and approximately 30% of total revenue, respectively. The growth of CSSE revenues is
influenced by: (1) new license revenue growth; (2) annual renewal of support contracts; (3)
increase in customers through acquisitions; and (4) fluctuations in currency rates. Substantially
all of our customers renew their annual support contracts. Over the last three years, our annual
revenue renewal rate of customers subscribing to comprehensive support and enhancements has been
greater than 90%. CSSE revenue is generally paid in advance and recognized ratably over the term
of the agreement, typically 12 months. CSSE renewal revenue is not recognized unless payment is
received from the customer.
Hardware and other revenue: Our hardware and other revenues totaled $28.9 million in 2010
representing 10% of total revenue with gross margins of 17.5%. During 2010, Americas, EMEA and
APAC were responsible for $27.8 million, $0.9 million, and $0.2 million, respectively, in hardware
and other revenues. In conjunction with the licensing of our software, and as a convenience for
our customers, we resell a variety of hardware products developed and manufactured by third
parties. These products include computer hardware, radio frequency terminal networks, RFID chip
readers, bar code printers and scanners, and other peripherals. We resell all third-party hardware
products pursuant to agreements with manufacturers or through distributor-authorized reseller
agreements pursuant to which we are entitled to purchase hardware products at discount prices and
to receive technical support in connection with product installations and any subsequent product
malfunctions. We generally purchase hardware from our vendors only after receiving an order from a
customer. As a result, we do not maintain hardware inventory.
Other revenue represents amounts associated with reimbursements from customers for
out-of-pocket expenses. The total amount of expense reimbursement recorded to hardware and other
revenue was $9.0 million, $7.5 million and $12.7 million for 2010, 2009 and 2008, respectively.
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Product Development
We intend to continue to invest significantly in research and development (R&D),
which historically has averaged about 14 cents of every revenue dollar, to provide market leading
solutions that help global manufacturers, wholesalers, distributors, retailers and logistics
providers successfully manage accelerating and fluctuating demands as well as the increasing
complexity and volatility of their local and global supply chains. Our research and development
expenses for the years ended December 31, 2010, 2009 and 2008 were $40.5 million, $36.7 million and $48.4 million, respectively. At December 31, 2010, our
R&D organization totaled approximately 625 employees, located in the U.S. and India, representing
about 30% of our total employees worldwide.
We will continue to focus our R&D resources on the development and enhancement of supply chain
software solutions. We offer what we believe to be the broadest solution portfolio in the supply
chain solutions marketplace, to address all aspects of planning and forecasting, inventory
optimization, order lifecycle management, transportation lifecycle management and distribution
management.
We also plan to continue to provide enhancements to existing solutions and to introduce new
solutions to address evolving industry standards and market needs. We identify further
enhancements to existing solutions and opportunities for new solutions through our customer support
organization, as well as through ongoing customer consulting engagements and implementations,
interactions with our user groups, association with leading industry analysts and market research
firms, and participation on industry standards and research committees. Our solutions address the
needs of customers in various vertical markets, including retail, consumer goods, food and grocery,
logistics service providers, industrial and wholesale, high technology and electronics, life
sciences and government.
Cash Flow and Financial Condition
For 2010, we generated cash flow from operating activities of $50.0 million and have
generated a cumulative total of $172.1 million for the three years ended December 31,
2010. Our cash and investments at December 31, 2010 totaled $126.9 million, with no debt on our
balance sheet. We currently have no credit facilities. During the past three years, our primary
uses of cash have been funding investment in R&D and operations to drive earnings growth and to
repurchase common stock.
During 2010, we repurchased approximately $76.5 million of Manhattan Associates outstanding
common stock under the repurchase program approved by our Board throughout the year. In January
2011, our Board of Directors approved raising our remaining share repurchase authority to $50.0
million. In 2011, we anticipate that our priorities for use of cash will be similar to prior
years, with our first priority being continued investment in product development and profitably
growing our business to extend our market leadership. We will continue to evaluate acquisition
opportunities that are complementary to our product footprint and technology direction. We will
also continue to weigh our share repurchase options against cash for acquisitions and investing in
the business. We do not anticipate any borrowing requirements in 2011 for general corporate
purposes.
Application of Critical Accounting Policies and Estimates
The SEC defines critical accounting policies as those that require application of
managements most difficult, subjective or complex judgments, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain and may change in subsequent
periods.
Our consolidated financial statements are prepared in accordance with U.S. generally accepted
accounting principles (GAAP). The preparation of financial statements in conformity with GAAP
requires us to make estimates and assumptions in certain circumstances that affect amounts reported
in the accompanying consolidated financial statements and related footnotes. We believe that
estimates, judgments and assumptions upon which we rely are reasonable based upon information
available to us at the time that these estimates, judgments and assumptions are made. To the extent
there are material differences between those estimates, judgments or assumptions and actual
results, our financial statements will be affected. The accounting policies that reflect our more
significant estimates, judgments and assumptions are: Revenue Recognition, Allowance for Doubtful
Accounts, Valuation of Goodwill, Accounting for Income Taxes, and Stock-based Compensation.
Revenue Recognition
Our revenue consists of revenues from the licensing and hosting of software, fees from
implementation and training services (collectively, professional services), plus customer support
services and software enhancements, and sales of hardware and other (other consists of
reimbursements of out of pocket expenses incurred by professional services). All revenue is
recognized net of any related sales taxes.
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We recognize license revenue when the following criteria are met: (1) a signed contract is
obtained; (2) delivery of the product has occurred; (3) the license fee is fixed or determinable;
and (4) collectibility is probable. Revenue recognition for software with multiple-element arrangements requires recognition of revenue using the residual method when
(a) there is vendor-specific objective evidence of the fair values of all undelivered elements in a
multiple-element arrangement that is not accounted for using long-term contract accounting; (b)
vendor-specific objective evidence of fair value does not exist for one or more of the delivered
elements in the arrangement; and (c) all other applicable revenue-recognition criteria for software
revenue recognition, other than the requirement for vendor-specific objective evidence of the fair
value of each delivered element of the arrangement are satisfied. For those contracts that contain
significant customization or modifications, license revenue is recognized using contract
accounting.
We allocate revenue to customer support and software enhancements and any other undelivered
elements of the arrangement based on vendor specific objective evidence, or VSOE, of fair value of
each element and such amounts are deferred until the applicable delivery criteria and other revenue
recognition criteria have been met. The balance of the revenue, net of any discounts inherent in
the arrangement, is recognized at the outset of the arrangement using the residual method as the
product licenses are delivered. If we cannot objectively determine the fair value of each
undelivered element based on the VSOE of fair value, we defer revenue recognition until all
elements are delivered, all services have been performed, or until fair value can be objectively
determined. We must apply judgment in determining all elements of the arrangement and in
determining the VSOE of fair value for each element, considering the price charged for each product
on a stand-alone basis or applicable renewal rates.
The accounting related to license revenue recognition in the software industry is complex and
affected by interpretations of the rules which are subject to change. Our judgment is required in
assessing the probability of collection, which is generally based on evaluation of
customer-specific information, historical collection experience and economic market conditions. If
market conditions decline, or if the financial condition of our customers deteriorates, we may be
unable to determine that collectibility is probable, and we could be required to defer the
recognition of revenue until we receive customer payments.
Our services revenue consists of fees generated from professional services, customer support
services and software enhancements related to our software products. Fees from professional
services performed by us are generally billed on an hourly basis, and revenue is recognized as the
services are performed. Professional services are sometimes rendered under agreements in which
billings are limited to contractual maximums or based upon a fixed-fee for portions of or all of
the engagement. Revenue related to fixed-fee based contracts is recognized on a proportional
performance basis based on the hours incurred on discrete projects within an overall services
arrangement. Project losses are provided for in their entirety in the period in which they become
known. Revenue related to customer support services and software enhancements is generally paid in
advance and recognized ratably over the term of the agreement, typically 12 months.
Hardware and other revenue is generated from the resale of a variety of hardware products,
developed and manufactured by third parties that are integrated with and complementary to our
software solutions. As part of a complete solution, our customers periodically purchase hardware
from us in conjunction with the licensing of software. These products include computer hardware,
radio frequency terminal networks, radio frequency identification (RFID) chip readers, bar code
printers and scanners and other peripherals. Hardware revenue is recognized upon shipment to the
customer when title passes. We generally purchase hardware from our vendors only after receiving an
order from a customer. As a result, we do not maintain hardware inventory.
In accordance with the other presentation matters within the Revenue Recognition Topic of the
Financial Accounting Standards Boards (FASB) Accounting Standards Codification, we recognize
amounts associated with reimbursements from customers for out-of-pocket expenses as revenue. Such
amounts have been included in hardware and other revenue. The total amount of expense reimbursement
recorded to revenue was $9.0 million, $7.5 million and $12.7 million for 2010, 2009 and 2008,
respectively.
Allowance for Doubtful Accounts
We continuously monitor collections and payments from our customers and maintain an allowance
for doubtful accounts based upon our historical experience and any specific customer collection
issues that we have identified. Additions to the allowance for doubtful accounts generally
represent a sales allowance on services revenue, which are recorded to operations as a reduction to
services revenue. While such losses have historically been within our expectations and the
provisions established, we cannot guarantee that we will continue to experience the same loss rates
that we have in the past.
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Valuation of Goodwill
In accordance with the Intangibles Goodwill and Other Topic of the FASB Accounting Standards
Codification, we do not amortize goodwill and other intangible assets with indefinite lives. Our
goodwill is subject to an annual impairment test, which requires us to estimate the fair value of
our business compared to the carrying value. The impairment reviews require an analysis of future
projections and assumptions about our operating performance. Should such review indicate the assets
are impaired, we would record an expense for the impaired assets.
Annual tests or other future events could cause us to conclude that impairment indicators
exist and that our goodwill is impaired. For example, if we had reason to believe that our recorded
goodwill had become impaired due to decreases in the fair market value of the underlying business,
we would have to record a charge to income for that portion of goodwill that we believed was
impaired. Any resulting impairment loss could have a material adverse impact on our financial
position and results of operations. At December 31, 2010, our goodwill balance was $62.3 million.
Accounting for Income Taxes
We provide for the effect of income taxes on our financial position and results of operations
in accordance with the Income Taxes Topic of the FASB Accounting Standards Codification. Under this
accounting pronouncement, income tax expense is recognized for the amount of income taxes payable
or refundable for the current year and for the change in net deferred tax assets or liabilities
resulting from events that are recorded for financial reporting purposes in a different reporting
period than recorded in the tax return. Management must make significant assumptions, judgments and
estimates to determine our current provision for income taxes and also our deferred tax assets and
liabilities and any valuation allowance to be recorded against our net deferred tax asset.
Our judgments, assumptions and estimates relative to the current provision for income tax take
into account current tax laws, our interpretation of current tax laws, allowable deductions,
projected tax credits and possible outcomes of current and future audits conducted by foreign and
domestic tax authorities. We do not recognize a tax benefit unless we conclude that it is more
likely than not that the benefit will be sustained on audit by the taxing authority based solely on
the technical merits of the associated tax position. If the recognition threshold is met, we
recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is
greater than 50 percent likely to be realized. Changes in tax law or our interpretation of tax laws
and the resolution of current and future tax audits could significantly impact the amounts provided
for income taxes in our financial position and results of operations. Our assumptions, judgments
and estimates relative to the value of our net deferred tax asset take into account predictions of
the amount and category of future taxable income. Actual operating results and the underlying
amount and category of income in future years could render our current assumptions, judgments and
estimates of recoverable net deferred taxes inaccurate, thus materially impacting our financial
position and results of operations.
Stock-Based Compensation
In January 2010 our Compensation Committee approved certain changes to our historical equity
incentive grant practices, with the objective to optimize the Companys performance and retention
strength while managing program share usage to improve long-term equity overhang. The change
eliminated stock option awards in favor of 100% restricted stock grants, which for the 2010 awards
contain vesting provisions that are 50% service-based and 50% performance-based. The 2010 awards
have a four year vesting period, with the performance portion tied to 2010 revenue and adjusted
earnings per share targets.
For our historical stock option grants, we estimated the fair value on the date of grant using
the Black-Scholes option pricing model. We based our estimate of fair value on certain assumptions,
including the expected term of the option, the expected volatility of the price of the underlying
share for the expected term of the option, the expected dividends on the underlying share for the
expected term, and the risk-free interest rate for the expected term of the option. We based our
expected volatilities on a combination of the historical volatility of our stock and the implied
volatility of publicly traded options (issued by third party) for our common stock. Due to the
limited trading volume of publicly traded options for our common stock, we placed a greater
emphasis on historical volatility of our common stock. We also used historical data to estimate
the term that options are expected to be outstanding. We based the risk-free interest rate on the
rate for U.S. Treasury zero-coupon issues with a term approximating the expected term.
We recognize compensation cost for service-based awards with graded vesting on a straight-line
basis over the entire vesting period, with the amount of compensation cost recognized at any date
at least equal to the portion of the grant-date value of the award that is vested at that date. For
our performance-based restricted stock awards with graded vesting, we recognize compensation cost
on an accelerated basis applying straight-line expensing for each separately vesting portion of
each award. Compensation cost recognized in any period is impacted by the number of stock-based
awards granted, the vesting period of the awards (which generally is four years), the estimated
forfeiture rate, and the probable outcome of any performance conditions.
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Accounting Charges
Restructuring charge. During 2009, we committed to and initiated plans to reduce our
workforce by approximately 140 positions to realign our capacity with demand forecasts. As a
result of this action, we recorded employee severance expense and outplacement service fees of $3.8
million pretax ($2.5 million after-tax or $0.11 per fully diluted share). We also recorded
additional employee severance expense of $63,000 in the first quarter of 2009 related to the
restructuring action taken in 2008.
During 2008, we committed to and initiated plans to reduce our workforce by approximately 170
positions to realign our capacity with demand forecasts. As a result of this action, we recorded
employee severance expense and outplacement service fees of approximately $4.7 million pretax ($3.0
million after-tax or $0.13 per fully diluted share) in the fourth quarter of 2008.
Asset Impairment Charges. During 2008, we recorded an other-than-temporary impairment charge
of $1.7 million, writing down the remaining balance of a $2.0 million investment in an RFID
technology company we made in July 2003. We recorded the additional impairment due to a
combination of continued negative financial results reported by this company in a very competitive
sector and a down round of financing (i.e., a round of financing that was dilutive to our
investment) in which our preferred share ownership was converted into common stock, eliminating our
preference rights associated with liquidation, thereby substantially impairing our ability to
recoup our investment.
In addition, in 2008 we recorded an other-than-temporary impairment charge of $3.5 million on
an investment in an auction rate security. We reduced the carrying value to zero due to a
combination of credit downgrades of the underlying issuer and the bond insurer as well as increased
publicly reported exposure to bankruptcy risk by the issuer and continued significant deterioration
in the credit markets limiting the issuers ability to re-finance the underlying bond.
Full Year 2010 Financial Summary
| Total revenue for the year ended December 31, 2010 was $297.1 million, an increase of 20%, compared to $246.7 million for 2009. License revenue increased 57% to $54.5 million from $34.7 million in 2009 and services revenue increased 13% to $213.8 million; | ||
| Operating income was $41.9 million for full year 2010, which includes $1.2 million of recoveries of previously expensed sales tax associated with expiring sales tax audit statutes, compared to $21.1 million for the twelve months ended December 31, 2009, which includes restructuring charges of $3.9 million associated with the workforce reduction executed in the second quarter of 2009. | ||
| Operating margins for 2010 were 14.1%, up 550 basis points compared to operating margins of 8.6% in 2009; | ||
| Diluted earnings per share were $1.25 compared to $0.73 in 2009; | ||
| Cash flow from operations totaled $50.0 million compared to $58.3 million in 2009; | ||
| Cash and investments on hand at December 31, 2010 was $126.9 million compared to $123.0 million at December 31, 2009; | ||
| The Company repurchased approximately 2.7 million shares of common stock during the year totaling $76.5 million at an average price of $28.15 under its publicly-announced buy-back program; and | ||
| In January 2011, the Board of Directors approved raising the Companys remaining share repurchase authority from $4.0 million to $50.0 million of Manhattan Associates outstanding common stock. |
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Results of Operations
The following table summarizes selected Statement of Income data for the years ended December
31, 2010, 2009 and 2008.
Year Ended December 31, | ||||||||||||||||||||
% Change vs. Prior Year | ||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenue: |
||||||||||||||||||||
Software license |
$ | 54,450 | $ | 34,686 | $ | 65,313 | 57 | % | -47 | % | ||||||||||
Services |
213,750 | 189,850 | 235,967 | 13 | % | -20 | % | |||||||||||||
Hardware and other |
28,917 | 22,131 | 35,921 | 31 | % | -38 | % | |||||||||||||
Total revenue |
297,117 | 246,667 | 337,201 | 20 | % | -27 | % | |||||||||||||
Costs and expenses: |
||||||||||||||||||||
Cost of license |
6,172 | 4,726 | 5,961 | 31 | % | -21 | % | |||||||||||||
Cost of services |
98,776 | 84,349 | 116,707 | 17 | % | -28 | % | |||||||||||||
Cost of hardware and other |
23,844 | 18,386 | 29,270 | 30 | % | -37 | % | |||||||||||||
Research and development |
40,508 | 36,681 | 48,407 | 10 | % | -24 | % | |||||||||||||
Sales and marketing |
42,702 | 36,137 | 51,177 | 18 | % | -29 | % | |||||||||||||
General and administrative |
34,027 | 29,946 | 37,145 | 14 | % | -19 | % | |||||||||||||
Depreciation and amortization |
9,161 | 11,418 | 12,699 | -20 | % | -10 | % | |||||||||||||
Restructuring charge (1) |
| 3,882 | 4,667 | -100 | % | -17 | % | |||||||||||||
Asset impairment charges (2) |
| | 5,205 | | -100 | % | ||||||||||||||
Total costs and expenses |
255,190 | 225,525 | 311,238 | 13 | % | -28 | % | |||||||||||||
Income from operations |
$ | 41,927 | $ | 21,142 | $ | 25,963 | 98 | % | -19 | % | ||||||||||
Operating margin |
14.1 | % | 8.6 | % | 7.7 | % |
(1) | The restructuring charge of $3.9 million and $4.7 million in 2009 and 2008, respectively, mainly represents employee severance and outplacement services resulting from the workforce reduction initiatives executed in the respective year. | |
(2) | The impairment charge for 2008 includes a $1.7 million charge for writing down the remaining balance of a $2.0 million investment in a RFID technology company we made in July 2003. We recorded the additional impairment due to a down round of financing (i.e., a round of financing that was dilutive to our investment) in which our preferred share ownership was converted into common stock, eliminating our preference rights associated with liquidation, thereby substantially impairing our ability to recoup our investment. In addition, we recorded an impairment charge of $3.5 million on an investment in an auction rate security. We reduced the carrying value to zero due to credit downgrades of the underlying issuer and the bond insurer as well as increasing publicly reported exposure to bankruptcy risk by the issuer. |
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We manage our business based on three geographic regions: the Americas, EMEA, and APAC.
Geographic revenue information is based on the location of sale. The revenues represented below are
from external customers only. The geographical-based expenses include costs of personnel, direct
sales and marketing expenses, and general and administrative costs to support the business. There
are certain corporate expenses included in the Americas region that are not charged to the other
segments including research and development, certain marketing and general and administrative costs
that support the global organization and the amortization of acquired developed technology.
Included in the Americas costs are all research and development costs, including the costs
associated with the Companys India operations. During 2010, 2009 and 2008, we derived the
majority of our revenues from sales to customers within our Americas region. The following table
summarizes revenue and operating profit by region:
Year Ended December 31, | ||||||||||||||||||||
% Change vs. Prior Year | ||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenue: |
||||||||||||||||||||
Software license |
||||||||||||||||||||
Americas |
$ | 44,254 | $ | 29,629 | $ | 51,392 | 49 | % | -42 | % | ||||||||||
EMEA |
4,972 | 2,617 | 8,885 | 90 | % | -71 | % | |||||||||||||
APAC |
5,224 | 2,440 | 5,036 | 114 | % | -52 | % | |||||||||||||
Total license |
$ | 54,450 | $ | 34,686 | $ | 65,313 | 57 | % | -47 | % | ||||||||||
Services |
||||||||||||||||||||
Americas |
$ | 176,912 | $ | 155,768 | $ | 192,483 | 14 | % | -19 | % | ||||||||||
EMEA |
26,269 | 24,637 | 32,163 | 7 | % | -23 | % | |||||||||||||
APAC |
10,569 | 9,445 | 11,321 | 12 | % | -17 | % | |||||||||||||
Total services |
$ | 213,750 | $ | 189,850 | $ | 235,967 | 13 | % | -20 | % | ||||||||||
Hardware and Other |
||||||||||||||||||||
Americas |
$ | 27,784 | $ | 21,161 | $ | 33,371 | 31 | % | -37 | % | ||||||||||
EMEA |
925 | 771 | 1,750 | 20 | % | -56 | % | |||||||||||||
APAC |
208 | 199 | 800 | 5 | % | -75 | % | |||||||||||||
Total hardware and other |
$ | 28,917 | $ | 22,131 | $ | 35,921 | 31 | % | -38 | % | ||||||||||
Total Revenue |
||||||||||||||||||||
Americas |
$ | 248,950 | $ | 206,558 | $ | 277,246 | 21 | % | -25 | % | ||||||||||
EMEA |
32,166 | 28,025 | 42,798 | 15 | % | -35 | % | |||||||||||||
APAC |
16,001 | 12,084 | 17,157 | 32 | % | -30 | % | |||||||||||||
Total revenue |
$ | 297,117 | $ | 246,667 | $ | 337,201 | 20 | % | -27 | % | ||||||||||
Operating income (Loss): |
||||||||||||||||||||
Americas |
$ | 35,868 | $ | 21,448 | $ | 18,849 | 67 | % | 14 | % | ||||||||||
EMEA |
3,685 | 1,093 | 6,640 | 237 | % | -84 | % | |||||||||||||
APAC |
2,374 | (1,399 | ) | 474 | 270 | % | -395 | % | ||||||||||||
Total operating income |
$ | 41,927 | $ | 21,142 | $ | 25,963 | 98 | % | -19 | % | ||||||||||
The results of our operations for the years ended December 31, 2010, 2009, and 2008 are
discussed below.
Revenue
Our revenue consists of fees generated from the licensing and hosting of software; fees from
professional services, customer support services and software enhancements; hardware sales of
complementary radio frequency and computer equipment; and other revenue representing amounts
associated with reimbursements from customers for out-of-pocket expenses.
Year Ended December, 31 | ||||||||||||||||||||||||||||||||
% Change vs. Prior Year | % of Total Revenue | |||||||||||||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | 2010 | 2009 | 2008 | |||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||
Software license |
$ | 54,450 | $ | 34,686 | $ | 65,313 | 57 | % | -47 | % | 18 | % | 14 | % | 19 | % | ||||||||||||||||
Services |
213,750 | 189,850 | 235,967 | 13 | % | -20 | % | 72 | % | 77 | % | 70 | % | |||||||||||||||||||
Hardware and other |
28,917 | 22,131 | 35,921 | 31 | % | -38 | % | 10 | % | 9 | % | 11 | % | |||||||||||||||||||
Total revenue |
$ | 297,117 | $ | 246,667 | $ | 337,201 | 20 | % | -27 | % | 100 | % | 100 | % | 100 | % | ||||||||||||||||
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License revenue
Year 2010 compared with year 2009
License revenue increased $19.8 million, or 57%, to $54.5 million in 2010 over 2009, primarily
driven by the improved global macro-economic environment resulting in customers and prospects
beginning to invest more capital to improve their supply chains. Our Americas, EMEA and APAC
license revenue increased $14.6 million, $2.4 million, and $2.8 million, respectively, compared to
the same period in the prior year.
The license sales percentage mix across our product suite in 2010 was approximately 60%
warehouse management solutions and 40% non-warehouse management solutions. Our warehouse management
solutions increased $10.8 million, or 54%, in 2010 compared to 2009 and non-warehouse management
solutions increased $8.9 million, or 62%, in 2010 over 2009.
Year 2009 compared with year 2008
License revenue decreased $30.6 million, or 47%, to $34.7 million in 2009 over 2008,
primarily, driven by the global economic recession in first half of 2009, which decreased sales and
lengthened sales cycles in the global market as customers and prospects constrained capital
spending. Our Americas, EMEA and APAC license revenue decreased $21.7 million, $6.3 million, and
$2.6 million, respectively, compared to the same period in the prior year.
The license sales percentage mix across our product suite in 2009 was approximately 60%
warehouse management solutions and 40% non-warehouse management solutions. Our warehouse management
solutions decreased $15.6 million, or 44%, in 2009 compared to 2008 and non-warehouse management
solutions decreased $15.0 million, or 51%, in 2009 over 2008.
Services revenue
Year 2010 compared with year 2009
Services revenue increased $23.9 million, or 13%, in 2010 compared to 2009 principally due to
a $19.1 million, or 17%, increase in professional services revenue and a $4.8 million, or 6%,
increase in CSSE revenue. The Americas, EMEA and APAC segments increased $21.1 million, $1.6
million, and $1.1 million, respectively, in 2010 compared to 2009. The increase in services revenue
is primarily due to improved license sales beginning in the second half of 2009 and continuing in
2010 combined with customer upgrade activity largely driven by the improving macroeconomic
conditions.
Year 2009 compared with year 2008
Services revenue decreased $46.1 million, or 20%, in 2009 compared to 2008 principally due to
a $46.2 million, or 29%, decrease in professional services revenue. The Americas, EMEA and APAC
segments decreased $36.7 million, $7.5 million, and $1.9 million, respectively, in 2009 compared to
2008. Our services revenue decline has primarily been caused by a decline in license revenues and
delayed or suspended multiple site implementations and/or upgrades. The revenue decline was
principally due to the global economic recession, which in turn severely impacted our customers
capital investment levels, prioritization and timing.
Additionally, over the past several years, our services revenue growth and margins have been
affected by some pricing pressures primarily attributable to deteriorating global macro-economic
conditions and competition.
Hardware and other
Sales of hardware increased $5.3 million, or 36%, in 2010 compared to 2009. Sales of hardware
decreased $8.6 million, or 37%, in 2009 compared to 2008. In 2010 and 2009, our Americas segment
accounted for nearly 100% of hardware sales. Sales of hardware are largely dependent upon
customer-specific desires, which fluctuate. Other revenue represents reimbursements for
out-of-pocket expenses that are required to be classified as revenue and are included in hardware
and other revenue. For 2010, 2009 and 2008, reimbursements by customers for out-of-pocket expenses
were approximately $9.0 million, $7.5 million and $12.7 million, respectively.
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Cost of Revenue
Year Ended December 31, | ||||||||||||||||||||
% Change vs. Prior Year | ||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Cost of license |
$ | 6,172 | $ | 4,726 | $ | 5,961 | 31 | % | -21 | % | ||||||||||
Cost of services |
98,776 | 84,349 | 116,707 | 17 | % | -28 | % | |||||||||||||
Cost of hardware and other |
23,844 | 18,386 | 29,270 | 30 | % | -37 | % | |||||||||||||
Total cost of revenue |
$ | 128,792 | $ | 107,461 | $ | 151,938 | 20 | % | -29 | % | ||||||||||
Cost of License
Cost of license consists of the costs associated with software reproduction; hosting services;
media, packaging and delivery, documentation and other related costs; and royalties on third-party
software sold with or as part of our products. Cost of licenses increased $1.4 million, or 31%, in
2010 compared to 2009, primarily due to increased sales of third party software driven by a 57%
increase in software license revenues over the prior year. Cost of license decreased $1.2 million,
or 21%, to $4.7 million in 2009 principally due to a 47% decrease in license revenue.
Cost of Services
Year 2010 compared with year 2009
Cost of services consists primarily of salaries and other personnel-related expenses of
employees dedicated to professional and technical services and customer support services. Cost of
services increased $14.4 million, or 17%, in 2010 compared to 2009 principally due to (i) a $9.0
million increase in performance-based bonus expense due to significantly higher achievement on
revenue and earnings per share, (ii) a $4.6 million increase in employee-related costs such as
salary, benefits, payroll taxes and contract labor resulting from an increase in the number of
professional services personnel in 2010 to support demand, and (iii) a $0.6 million increase in
travel expenses attributable to increased services business.
Services gross margin decreased 180 basis points to 53.8% in 2010 from 55.6% in 2009. The
decrease in services margin is primarily attributable to the increase in professional services
costs due to the impact of 2009 short-term compensation reduction measures that were eliminated in
2010, higher 2010 performance-based compensation, and increased hiring to fulfill services demand.
Year 2009 compared with year 2008
Cost of services decreased $32.4 million, or 28%, in 2009 compared to 2008 principally due to
(i) a $21.7 million decrease in employee-related costs such as salary, benefits and payroll taxes
resulting from a decrease in the number of professional services personnel due to headcount
reduction initiatives in the fourth quarter of 2008 and the second quarter of 2009 to align
capacity with demand, (ii) a $4.4 million decrease in performance based bonus expense caused by
lower revenue performance as well as lower headcount, and (iii) a $3.3 million decrease in travel
expenses due to fewer services projects.
Services gross margin increased 5.1 percentage points to 55.6% in 2009 from 50.5% in 2008.
The increase in services margin is attributable to the decrease in professional services costs
driven by expense reduction actions and lower performance based compensation expense.
Cost of Hardware and other
Cost of hardware increased $4.0 million to $15.0 million in 2010 compared to 2009 as a direct
result of an increase in sales of hardware. In 2009, cost of hardware decreased to $11.0 million
from $17.0 million in 2008 as a direct result of decreased hardware sales. Cost of hardware and
other includes out-of-pocket expenses to be reimbursed by customers of approximately $8.8 million,
$7.4 million and $12.3 million for 2010, 2009 and 2008, respectively. Changes in amounts of
out-of-pocket expenses correlate to changes in amounts of services revenue.
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Operating Expenses
Year Ended December 31, | ||||||||||||||||||||
% Change vs. Prior Year | ||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Research and development |
$ | 40,508 | $ | 36,681 | $ | 48,407 | 10 | % | -24 | % | ||||||||||
Sales and marketing |
42,702 | 36,137 | 51,177 | 18 | % | -29 | % | |||||||||||||
General and administrative |
34,027 | 29,946 | 37,145 | 14 | % | -19 | % | |||||||||||||
Depreciation and
amortization |
9,161 | 11,418 | 12,699 | -20 | % | -10 | % | |||||||||||||
Restructuring charge |
| 3,882 | 4,667 | -100 | % | -17 | % | |||||||||||||
Asset impairment charges |
| | 5,205 | | -100 | % | ||||||||||||||
Operating expenses |
$ | 126,398 | $ | 118,064 | $ | 159,300 | 7 | % | -26 | % | ||||||||||
Research and Development
Our principal research and development activities during 2010, 2009 and 2008 focused on the
expansion and integration of new products acquired and new product releases and expanding the
product footprint of our supply chain optimization solutions called Supply Chain Optimization from
Planning through Execution. The Manhattan SCOPE Platform provides not only a sophisticated service
oriented architecture based application framework, but a platform that facilitates the integration
with Enterprise Resource Planning (ERP) and other supply chain solutions.
For the years ended December 31, 2010, 2009, and 2008, we capitalized no research and
development costs because the costs incurred following the attainment of technological feasibility
for the related software product through the date of general release were insignificant.
Year 2010 compared with year 2009
Research and development expenses primarily consist of salaries and other personnel-related
costs for personnel involved in our research and development activities. Consistent with prior
years, we typically invest approximately 14% to 15% of total revenue in research and development.
In 2010, research and development expenses increased to $40.5 million from $36.7 million in 2009.
This $3.8 million increase was primarily due to the increase of $3.7 million in performance based
bonus expense resulting from higher achievement on revenue and earnings per share.
Year 2009 compared with year 2008
Research and development expenses decreased to $36.7 million in 2009 compared to $48.4 million
in 2008 primarily due to: (i) a $7.7 million decrease in salary-related costs resulting from a
decrease in the number of R&D personnel; (ii) a $1.4 million decrease in bonuses caused by
headcount reductions as well as lower achievement of performance based compensation; and (iii) a
$1.0 million decrease in travel expenses.
Sales and Marketing
Year 2010 compared with year 2009
Sales and marketing expenses include salaries, commissions, travel and other personnel-related
costs and the costs of our marketing and alliance programs and related activities. The $6.6
million, or 18%, increase in sales and marketing expenses in 2010 compared to 2009 was attributable
to (1) the increase in performance based bonus and commission expense of $5.3 million related to
increased revenue and earnings performance, (2) a $0.8 million increase in stock compensation
expense, and (3) a $0.6 million increase in travel expense.
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Year 2009 compared with year 2008
The $15.0 million, or 29%, decrease in sales and marketing expenses in 2009 compared to 2008
was attributable to lower headcount and license revenue which resulted in: (i) a $7.9 million
decrease in employee-related costs such as salary, benefits, payroll taxes and stock compensation
expense, (ii) a $4.2 million decrease in bonus and commission expense, and (iii) a $2.7 million
decrease in travel expenses.
General and Administrative
Year 2010 compared with year 2009
General and administrative expenses consist primarily of salaries and other personnel-related
costs of executive, financial, human resources, information technology and administrative
personnel, as well as facilities, legal, insurance, accounting and other administrative expenses.
The net increase of $4.1 million, or 14%, in general and administrative expenses in 2010 compared
to 2009 was primarily attributable to (i) an increase of $2.9 million in performance-based bonus
expense, (ii) a $1.5 million increase in employee-related costs such as salary, benefits and
payroll taxes and contract labor, and (iii) a $0.4 million increase in stock compensation expense.
This increase was partially offset by $1.2 million in recoveries of previously recorded state
sales tax resulting from sales tax audits.
Year 2009 compared with year 2008
The net decrease of $7.2 million, or 19%, in general and administrative expenses in 2009
compared to 2008 was primarily attributable to (i) a $2.9 million decrease in
employee-related expense such as salary, benefits, payroll taxes related to workforce and
expense reduction initiatives, (ii) a $1.5 million decrease in expense for sales tax exposure
reserves, and (iii) a $1.1 million reduction in bonus expense due to the decline in total revenue
and earnings per share performance.
Depreciation and Amortization
Depreciation expense amounted to $6.9 million, $8.4 million and $9.4 million, during 2010,
2009, and 2008, respectively, and has decreased due to lower capital expenditures over the past
several years. Amortization of intangibles amounted to $2.3 million, $3.0 million and $3.3 million
during 2010, 2009, and 2008, respectively. We have recorded goodwill and other acquisition-related
intangible assets as part of the purchase accounting associated with various acquisitions. The
decreases in amortization expense in 2010 and 2009 of $0.7 million and $0.3 million, respectively,
were mainly associated with certain intangible assets related to prior acquisitions, which became
fully amortized.
Restructuring charge
During 2009, we committed to and initiated plans to reduce our workforce by approximately 140
positions to realign our capacity with demand forecasts. As a result of this action, we recorded
employee severance expense and outplacement service fees of approximately $3.8 million pretax ($2.5
million after-tax or $0.11 per fully diluted share). We also recorded additional employee
severance expense of $63,000 in the first quarter of 2009 related to the restructuring action taken
in 2008.
During 2008, we committed to and initiated plans to reduce our workforce by approximately 170
positions to realign our capacity with demand forecasts. As a result of this action, we recorded
employee severance expense and outplacement service fees of approximately $4.7 million pretax ($3.0
million after-tax or $0.13 per fully diluted share) in the fourth quarter of 2008.
Asset impairment charges
Asset impairment charges of $5.2 million in 2008 consist of a $3.5 million impairment on an
investment in an auction-rate security and a $1.7 million impairment on an investment in an RFID
technology company. We reduced the carrying value of the auction-rate security investment to zero
due to a combination of credit downgrades of the underlying issuer and the bond insurer as well as
increased publicly reported exposure to bankruptcy risk by the issuer and continued significant
deterioration in the credit markets limiting the issuers ability to re-finance the underlying
bond. We also reduced the carrying value of our investment in the RFID technology company to zero
due to a combination of continued negative financial results reported by this company in a very
competitive sector and a down round of financing (i.e., a round of financing that was dilutive to
our investment) in which our preferred share ownership was converted into common stock, eliminating
our preference rights associated with liquidation, thereby substantially impairing our ability to
recoup our investment.
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Operating Income
Operating income for 2010 was $41.9 million, an increase of $20.8 million as compared to $21.1
million for 2009. Operating margins improved to 14.1% in 2010, up from 8.6% in 2009. The increase
in operating income and margins is primarily due to a 20% increase in total revenue and lower
expenses versus 2009 due to workforce reduction charges taken in 2009. Operating income in the
Americas, EMEA and APAC segment increased by $14.4 million, $2.6 million and $3.8 million,
respectively in 2010.
Operating income in 2009 decreased by $4.8 million on the consolidated revenue decline of 27%
to $21.1 million compared to $26.0 million in 2008. Operating margins improved to 8.6% in 2009 from
7.7% in 2008 primarily due to the decrease in total costs in the current year driven by our actions
to lower headcount to align capacity with demand combined with lower performance based compensation
expense. Operating income in the Americas segment increased by $2.6 million while the EMEA and
APAC segment decreased by $5.5 million and $1.9 million, respectively in 2009.
Other (Loss) Income and Income Taxes
Year Ended December 31, | ||||||||||||||||||||
% Change vs. Prior Year | ||||||||||||||||||||
2010 | 2009 | 2008 | 2010 | 2009 | ||||||||||||||||
Other (loss)
income, net |
$ | (143 | ) | $ | (756 | ) | $ | 5,545 | -81 | % | -114 | % | ||||||||
Income tax provision |
13,723 | 3,824 | 8,710 | 259 | % | -56 | % |
Other (Loss) Income, net
Other (loss) income, net primarily includes interest income, foreign currency gains and
losses, and other non-operating expenses. Interest income was $0.6 million, $0.4 million, and $1.8
million for the years ended December 31, 2010, 2009, and 2008, respectively. The increase of $0.2
million in interest income in 2010 compared to 2009 was due to a higher weighted-average interest
rate earned. The decrease of $1.4 million in interest income in 2009 compared to 2008 was due to a
lower weighted-average interest rate earned. The weighted-average interest rate earned on cash
and investments was 0.5%, less than 0.5%, and 2.3% for the years ended December 31, 2010, 2009 and
2008, respectively. We recorded net foreign currency losses of $0.7 million and $1.0 million in
2010 and 2009, respectively and a net foreign currency gain of $3.9 million in 2008. The foreign
currency losses and gain mainly resulted from losses or gains on intercompany transactions
denominated in foreign currencies with subsidiaries due to the fluctuation of the U.S. dollar
relative to other foreign currencies, primarily the Indian Rupee, the British Pound and the Euro.
Income Tax Provision
Our effective income tax rates were 32.8%, 18.8%, and 27.6% in 2010, 2009 and 2008,
respectively. Our effective income tax rate takes into account the source of taxable income,
domestically by state and internationally by country, and available income tax credits. The
effective tax rate in 2010 included a tax benefit from the disqualifying disposition of incentive
stock options that were previously expensed and the reduction of U.S. federal income tax reserves
that resulted from the expiration of tax audit statues for tax returns filed for 2006 and prior,
partially offset by the establishment of income tax reserves for state audits. The effective tax
rate in 2009 included the reduction of income tax reserves resulting from expiration of tax audit
statutes for U.S. federal income tax returns filed for 2005, partially offset by the establishment
of $0.8 million in tax reserves associated with the treatment of currency gains under our transfer
pricing policy with one of our foreign subsidiaries. The effective tax rate in 2008 included the
reduction of income tax reserves resulting from expiration of tax audit statutes for U.S. federal
income tax returns filed for 2004, partially offset by $0.6 million tax expense on the repatriation
of cash from a foreign subsidiary associated with the settlement of several large intercompany
balances in order to reduce the unrealized foreign exchange gain/loss volatility in other
income.
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Liquidity and Capital Resources
During 2010, 2009, and 2008, we funded our business through cash generated from operations. As
of December 31, 2010, we had $126.9 million in cash and investments as compared to $123.0 million
at December 31, 2009.
Our operating activities provided cash of $50.0 million, $58.3 million and $63.8 million in
2010, 2009, and 2008, respectively. Cash from operating activities for 2010 decreased $8.3 million
compared to 2009 principally due to increased working capital requirements associated with revenue
growth. Days sales outstanding (DSO) was 61 days at December 31, 2010 as compared to 56 days at
December 31, 2009. Cash from operating activities for 2009 decreased $5.5 million compared to 2008
due to lower revenue partially offset by strong accounts receivable collections. Days sales
outstanding (DSO) was 56 days at December 31, 2009 as compared to 78 days at December 31, 2008.
Our investing activities used cash of approximately $8.9 million and $2.3 million in 2010 and
2009, respectively. The use of cash for investing activities for the year ended December 31, 2010
was for capital expenditures of approximately $5.9 million and the net purchase of $3.0 million in
short-term investments. The use of cash for investing activities for the year ended December 31,
2009 was for capital expenditures of approximately $2.4 million. During 2008, our investing
activities provided cash of approximately $13.9 million from net maturities and sales of
investments of $21.6 million, partially offset by payments in connection with purchases of capital
equipment of $7.7 million.
Our financing activities used cash of approximately $40.9 million, $21.7 million and $31.8
million in 2010, 2009 and 2008, respectively. The principal use of cash for financing activities
was to repurchase shares of our common stock under our publicly-announced buy-back program for
approximately $76.5 million, $22.8 million and $35.0 million in 2010, 2009 and 2008, respectively,
and shares withheld for taxes due upon restricted stock vesting for approximately $1.2 million,
$0.6 million and $0.1 million in 2010, 2009 and 2008, respectively. These repurchases were
partially offset by the proceeds from the issuance of our common stock pursuant to the exercise of
stock options of $36.4 million, $1.7 million, and $3.2 million in 2010, 2009, and 2008,
respectively. In January 2011, our Board of Directors increased our remaining share repurchase
authority of $4.0 million at December 31, 2010 to a total of $50.0 million.
Periodically, opportunities may arise to grow our business through the acquisition of
complementary and synergistic companies, products and technologies. Any material acquisition could
result in a decrease to our working capital depending on the amount, timing and nature of the
consideration to be paid. We believe that our existing cash and investments will be sufficient to
meet our working capital and capital expenditure needs at least for the next twelve months,
although there can be no assurance that this will be the case. In 2011, we anticipate that our
priorities for use of cash will be similar to prior years, with our first priority being continued
investment in product development and profitably growing our business to extend our market
leadership. We will continue to evaluate acquisition opportunities that are complementary to our
product footprint and technology direction. We will also continue to weigh our share repurchase
options against cash for acquisitions and investing in the business. We do not anticipate any
borrowing requirements in 2011 for general corporate purposes.
New Accounting Pronouncements
In January 2010, the FASB issued an Accounting Standard Update to improve disclosures about
fair value measurements. This guidance requires enhanced disclosures regarding transfers in and
out of the levels within the fair value hierarchy. Separate disclosures are required for
significant transfers in and out of Level 1 and 2 in the fair value hierarchy and the reasons for
the transfers. This guidance also requires disclosures relating to the reconciliation of fair
value measurements using significant unobservable inputs (Level 3) investments. The new
disclosures and clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009 except Level 3 reconciliation disclosures which
are effective for the fiscal years and interim periods beginning after December 15, 2010. We
adopted the enhanced disclosures for Level 1 and 2 in our first quarter of 2010 reporting, which
did not have a material impact on our financial statements. We do not expect the Level 3
reconciliation disclosures to have a material impact on our financial statements when we adopt
them.
In February 2010, the FASB issued an Accounting Standards Update to amend certain recognition
and disclosure requirements related to subsequent events. The new guidance clarifies that
management must evaluate, as of each reporting period, events or transactions that occur after the
balance sheet date through the date that the financial statements are issued. Management must
perform its assessment for both interim and annual financial reporting periods. This update also
exempts SEC filers from disclosing the date through which subsequent events have been evaluated.
The adoption of this amended standard did not have an impact on our consolidated financial
statements.
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Table of Contents
Off-Balance Sheet Arrangements and Aggregate Contractual Obligations
Our principal commitments as of December 31, 2010 consist of obligations under operating
leases. We expect to fulfill all of the following commitments from our working capital. We have no
off-balance sheet arrangements within the meaning of SEC rules.
Lease Commitments
We lease our facilities and some of our equipment under noncancelable operating lease
arrangements that expire at various dates through 2018. Rent expense for these leases aggregated
$5.3 million, $6.1 million and $7.2 million during 2010, 2009, and 2008, respectively.
The following table summarizes our contractual commitments as of December 31, 2010 (in
thousands):
Total | 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | ||||||||||||||||||||||
Non-cancelable
operating leases |
$ | 40,363 | $ | 6,333 | $ | 5,542 | $ | 5,198 | $ | 5,011 | $ | 4,799 | $ | 13,480 |
Indemnifications
Our sales agreements with customers generally contain infringement indemnity provisions. Under
these agreements, we agree to indemnify, defend and hold harmless the customer in connection with
patent, copyright or trade secret infringement claims made by third parties with respect to the
customers authorized use of our products and services. The indemnity provisions generally provide
for our control of defense and settlement and cover costs and damages finally awarded against the
customer, as well as our modification of the product so it is no longer infringing or, if it cannot
be corrected, return of the product for a refund. Our sales agreements with customers sometimes
also contain indemnity provisions for death, personal injury or property damage caused by our
personnel or contractors in the course of performing services to customers. Under these agreements,
we agree to indemnify, defend and hold harmless the customer in connection with death, personal
injury and property damage claims made by third parties with respect to actions of our personnel or
contractors. The indemnity provisions generally provide for our control of defense and settlement
and cover costs and damages finally awarded against the customer. The indemnity obligations
contained in sales agreements generally have no specified expiration date and no specified monetary
limitation on the amount of award covered. We have not previously incurred costs to settle claims
or pay awards under these indemnification obligations. We account for these indemnity obligations
in accordance with FASB guidance on accounting for contingencies, and record a liability for these
obligations when a loss is probable and reasonably estimable. We have not recorded any liabilities
for these agreements as of December 31, 2010.
Warranties
We warrant to our customers that our software products will perform in all material respects
in accordance with our standard published specifications in effect at the time of delivery of the
licensed products to the customer for 6 months after first use of the licensed products, but no
more than 24 months after execution of the license agreement. Additionally, we warrant to our
customers that our services will be performed consistent with generally accepted industry standards
or specific service levels through completion of the agreed upon services. If necessary, we would
provide for the estimated cost of product and service warranties based on specific warranty claims
and claim history. However, we have not incurred significant recurring expense under our product or
service warranties. As a result, we believe the estimated fair value of these agreements is
nominal. Accordingly, we have no liabilities recorded for these agreements as of December 31, 2010.
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Foreign Business
Our international business is subject to risks typical of an international business,
including, but not limited to: differing economic conditions, changes in political climate,
differing tax structures, other regulations and restrictions, and foreign exchange rate volatility.
Our international operations currently include business activity out of offices in the United
Kingdom, the Netherlands, France, Australia, China, Japan, Singapore and India. When the U.S.
dollar strengthens against a foreign currency, the value of our sales and expenses in that currency
converted to U.S. dollars decreases. When the U.S. dollar weakens, the value of our sales and
expenses in that currency converted to U.S. dollars increases. We recognized foreign exchange
losses of $0.7 million and $1.0 million in 2010 and 2009, respectively and a foreign exchange gain
of $3.9 million in 2008. Foreign exchange rate transaction gains and losses are classified in
Other (loss) income, net in our Consolidated Statements of Operations. A fluctuation of 10% in
the period end exchange rates at December 31, 2010 and 2009 relative to the U.S. dollar would
result in changes of approximately $0.1 million and $0.2 million in the reported foreign currency
gain or loss, respectively.
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Interest Rates
We currently invest our cash in a variety of financial instruments, including taxable and
tax-advantaged floating rate obligations in money market funds and certificates of deposit. These
investments are denominated in U.S. dollars. Cash balances in foreign currencies overseas are
derived from operations. At December 31, 2010, our cash and investments balance totaled $126.9
million, of which $120.7 million is highly liquid. The remaining investments totaling $6.1 million
are invested in short-term certificates of deposit and auction rate securities which were purchased
prior to 2008. Our cash equivalents balance at December 31, 2010 was $31.2 million. Cash
equivalents principally consist of highly liquid money market funds and certificates of deposit
with maturities of less than three months when purchased.
Investments in both fixed rate and floating rate interest-earning instruments carry a degree
of interest rate risk. Fixed rate securities may have their fair market value adversely impacted
due to a rise in interest rates, while floating rate securities may produce less income than
expected if interest rates fall. Due in part to these factors, our future investment income may
fall short of expectations due to changes in interest rates, or we may suffer losses in principal
if forced to sell securities that have seen a decline in market value due to changes in interest
rates. The weighted-average interest rate of return on cash and investment securities was
approximately 0.5% and less than 0.5% for the year ended December 31, 2010 and 2009, respectively.
The fair value of cash equivalents and investments held at December 31, 2010 and 2009 was $37.4
million and $60.1 million, respectively. Based on the average investments outstanding during 2010
and 2009, increases or decreases in the rate of return of 25 basis points would result in
increases or decreases to interest income of approximately $0.3 million for both year 2010 and
2009, from the reported interest income.
Item 8. | Financial Statements and Supplementary Data |
Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | Page | |||
42 | ||||
43 | ||||
44 | ||||
45 | ||||
46 | ||||
47 | ||||
48 | ||||
49 | ||||
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MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Manhattan Associates, Inc. is responsible for establishing and maintaining
adequate internal control over financial reporting. The Companys internal control over financial
reporting is a process designed under the supervision of the Companys principal executive and
principal financial officers to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of the Companys financial statements for external purposes in
accordance with U.S. generally accepted accounting principles.
The Companys internal control over financial reporting includes policies and procedures that
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
transactions and dispositions of assets; provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with U.S.
generally accepted accounting principles, and that receipts and expenditures are being made only in
accordance with authorizations of management and the directors of the Company; and provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
As of the end of the Companys 2010 fiscal year, management conducted an assessment of the
Companys internal control over financial reporting based on the framework established in Internal
Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this assessment, management has determined that the Companys internal
control over financial reporting as of December 31, 2010 was effective.
Ernst & Young, the independent registered public accounting firm that audited the Companys
financial statements for the year ended December 31, 2010, has audited the Companys internal
control over financial reporting as of December 31, 2010 and has issued a report regarding the
Companys internal control over financial reporting appearing on page 43, which expresses an
unqualified opinion on the effectiveness of the Companys internal control over financial reporting
as of December 31, 2010.
/s/ Peter F. Sinisgalli
|
||||
President and Chief Executive Officer | ||||
February 23, 2011 | ||||
/s/ Dennis B. Story
|
||||
Executive Vice President, | ||||
Chief Financial Officer and Treasurer | ||||
February 23, 2011 |
42
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board of Directors and Shareholders
Manhattan Associates, Inc. and Subsidiaries
Manhattan Associates, Inc. and Subsidiaries
We have audited Manhattan Associates, Inc. and subsidiaries internal control over financial
reporting as of December 31, 2010, based on criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). Manhattan Associates, Inc. and subsidiaries management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Managements Annual Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the
Companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Manhattan Associates, Inc. and subsidiaries maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2010, based on the COSO
criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Manhattan Associates, Inc. and
subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of
operations, cash flows, shareholders equity, and comprehensive income for each of the three years
in the period ended December 31, 2010 of Manhattan Associates, Inc. and subsidiaries and our report
dated February 23, 2011 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP |
Atlanta, Georgia
February 23, 2011
February 23, 2011
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON THE CONSOLIDATED FINANCIAL STATEMENTS
ON THE CONSOLIDATED FINANCIAL STATEMENTS
The Board of Directors and Shareholders
Manhattan Associates, Inc. and Subsidiaries
Manhattan Associates, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Manhattan Associates, Inc. and
subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of
operations, cash flows, shareholders equity, and comprehensive income for each of the three years
in the period ended December 31, 2010. Our audits also included the financial statement schedule
listed in the Index at Item 15(a). These financial statements and schedule are the responsibility
of the Companys management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Manhattan Associates, Inc. and
subsidiaries at December 31, 2010 and 2009, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31, 2010, in conformity
with U.S. generally accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Manhattan Associates, Inc. and subsidiaries internal control over financial
reporting as of December 31, 2010, based on criteria established in Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February 23, 2011 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP |
Atlanta, Georgia
February 23, 2011
February 23, 2011
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Revenue: |
||||||||||||
Software license |
$ | 54,450 | $ | 34,686 | $ | 65,313 | ||||||
Services |
213,750 | 189,850 | 235,967 | |||||||||
Hardware and other |
28,917 | 22,131 | 35,921 | |||||||||
Total revenue |
297,117 | 246,667 | 337,201 | |||||||||
Costs and expenses: |
||||||||||||
Cost of license |
6,172 | 4,726 | 5,961 | |||||||||
Cost of services |
98,776 | 84,349 | 116,707 | |||||||||
Cost of hardware and other |
23,844 | 18,386 | 29,270 | |||||||||
Research and development |
40,508 | 36,681 | 48,407 | |||||||||
Sales and marketing |
42,702 | 36,137 | 51,177 | |||||||||
General and administrative |
34,027 | 29,946 | 37,145 | |||||||||
Depreciation and
amortization |
9,161 | 11,418 | 12,699 | |||||||||
Restructuring charge |
| 3,882 | 4,667 | |||||||||
Asset impairment charges |
| | 5,205 | |||||||||
Total costs and expenses |
255,190 | 225,525 | 311,238 | |||||||||
Operating income |
41,927 | 21,142 | 25,963 | |||||||||
Interest income, net |
636 | 368 | 1,823 | |||||||||
Other (loss) income, net |
(779 | ) | (1,124 | ) | 3,722 | |||||||
Income before income taxes |
41,784 | 20,386 | 31,508 | |||||||||
Income tax provision |
13,723 | 3,824 | 8,710 | |||||||||
Net income |
$ | 28,061 | $ | 16,562 | $ | 22,798 | ||||||
Basic earnings per share |
$ | 1.31 | $ | 0.74 | $ | 0.95 | ||||||
Diluted earnings per share |
$ | 1.25 | $ | 0.73 | $ | 0.94 | ||||||
Weighted average number of shares: |
||||||||||||
Basic |
21,497 | 22,385 | 24,053 | |||||||||
Diluted |
22,450 | 22,558 | 24,328 |
The accompanying notes are an integral part of these Consolidated Statements of Operations.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
December 31, | ||||||||
2010 | 2009 | |||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 120,744 | $ | 120,217 | ||||
Short term investments |
4,414 | | ||||||
Accounts receivable, net of allowance of $5,711 and $4,943 in 2010 and 2009,
respectively |
47,419 | 37,945 | ||||||
Deferred income taxes |
7,214 | 5,745 | ||||||
Income taxes receivable |
2,446 | | ||||||
Prepaid expenses |
5,520 | 4,240 | ||||||
Other current assets |
1,223 | 607 | ||||||
Total current assets |
188,980 | 168,754 | ||||||
Property and equipment, net |
14,833 | 15,759 | ||||||
Long-term investments |
1,711 | 2,797 | ||||||
Goodwill, net |
62,265 | 62,280 | ||||||
Acquisition-related intangible assets, net |
1,186 | 3,473 | ||||||
Deferred income taxes |
8,816 | 9,826 | ||||||
Other assets |
2,673 | 1,822 | ||||||
Total assets |
$ | 280,464 | $ | 264,711 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 7,745 | $ | 4,434 | ||||
Accrued compensation and benefits |
19,807 | 12,855 | ||||||
Accrued and other liabilities |
13,856 | 15,430 | ||||||
Deferred revenue |
44,974 | 37,436 | ||||||
Income taxes payable |
| 796 | ||||||
Total current liabilities |
86,382 | 70,951 | ||||||
Deferred rent long-term |
7,444 | 7,830 | ||||||
Other non-current liabilities |
2,838 | 2,565 | ||||||
Shareholders equity: |
||||||||
Preferred stock, no par value; 20,000,000 shares authorized, no shares issued or
outstanding in 2010 or 2009 |
| | ||||||
Common stock, $.01 par value; 100,000,000 shares authorized; 21,729,789 and
22,467,123
shares issued and outstanding at December 31, 2010 and 2009, respectively |
217 | 225 | ||||||
Additional paid-in capital |
487 | 2,892 | ||||||
Retained earnings |
184,152 | 182,387 | ||||||
Accumulated other comprehensive loss |
(1,056 | ) | (2,139 | ) | ||||
Total shareholders equity |
183,800 | 183,365 | ||||||
Total liabilities and shareholders equity |
$ | 280,464 | $ | 264,711 | ||||
The accompanying notes are an integral part of these Consolidated Balance Sheets.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Operating activities: |
||||||||||||
Net income |
$ | 28,061 | $ | 16,562 | $ | 22,798 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
9,161 | 11,418 | 12,699 | |||||||||
Asset impairment charge |
| | 5,205 | |||||||||
Stock compensation |
10,420 | 8,622 | 8,864 | |||||||||
(Gain) loss on disposal of equipment |
(4 | ) | 130 | 156 | ||||||||
Tax benefit (deficiency) of stock awards exercised/vested |
2,207 | (1,023 | ) | 202 | ||||||||
Excess tax benefits from stock based compensation |
(475 | ) | (64 | ) | (100 | ) | ||||||
Deferred income taxes |
(463 | ) | 2,077 | (1,389 | ) | |||||||
Unrealized foreign currency loss |
210 | 1,022 | (694 | ) | ||||||||
Changes in operating assets and liabilities: |
||||||||||||
Accounts receivable, net |
(9,454 | ) | 26,658 | 7,077 | ||||||||
Other assets |
(2,661 | ) | 3,058 | 2,691 | ||||||||
Accounts payable, accrued and other liabilities |
8,271 | (10,453 | ) | 5,997 | ||||||||
Income taxes |
(2,934 | ) | (3,502 | ) | (1,324 | ) | ||||||
Deferred revenue |
7,633 | 3,818 | 1,659 | |||||||||
Net cash provided by operating activities |
49,972 | 58,323 | 63,841 | |||||||||
Investing activities: |
||||||||||||
Purchase of property and equipment |
(5,871 | ) | (2,378 | ) | (7,708 | ) | ||||||
Purchases of available-for-sale investments |
(8,625 | ) | | (285,593 | ) | |||||||
Sales/maturies of available-for-sale investments |
5,614 | 84 | 307,216 | |||||||||
Net cash (used in) provided by investing activities |
(8,882 | ) | (2,294 | ) | 13,915 | |||||||
Financing activities: |
||||||||||||
Purchase of common stock |
(77,704 | ) | (23,435 | ) | (35,107 | ) | ||||||
Proceeds from issuance of common stock from options exercised |
36,368 | 1,662 | 3,177 | |||||||||
Excess tax benefits from stock based compensation |
475 | 64 | 100 | |||||||||
Net cash used in financing activities |
(40,861 | ) | (21,709 | ) | (31,830 | ) | ||||||
Foreign currency impact on cash |
298 | 158 | (4,862 | ) | ||||||||
Net change in cash and cash equivalents |
527 | 34,478 | 41,064 | |||||||||
Cash and cash equivalents at beginning of period |
120,217 | 85,739 | 44,675 | |||||||||
Cash and cash equivalents at end of period |
$ | 120,744 | $ | 120,217 | $ | 85,739 | ||||||
Supplemental disclosures of cash flow information: |
||||||||||||
Cash paid for taxes |
$ | 14,340 | $ | 6,218 | $ | 11,135 | ||||||
The accompanying notes are an integral part of these Consolidated Statements of Cash Flows.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In thousands, except share data)
Accumulated | ||||||||||||||||||||||||
Additional | Other | Total | ||||||||||||||||||||||
Common Stock | Paid-In | Retained | Comprehensive | Shareholders | ||||||||||||||||||||
Shares | Amount | Capital | Earnings | Income (Loss) | Equity | |||||||||||||||||||
Balance, December 31, 2007 |
24,899,919 | $ | 249 | $ | 17,744 | $ | 165,189 | $ | 2,523 | $ | 185,705 | |||||||||||||
Repurchase of common stock |
(1,710,441 | ) | (17 | ) | (29,985 | ) | (5,105 | ) | | (35,107 | ) | |||||||||||||
Stock option exercises |
203,275 | 2 | 3,175 | | | 3,177 | ||||||||||||||||||
Stock option expense |
| | 5,458 | | | 5,458 | ||||||||||||||||||
Restricted stock issuance/expense |
188,356 | | 3,406 | | | 3,406 | ||||||||||||||||||
Tax effects of stock based
compensation |
| | 202 | | | 202 | ||||||||||||||||||
Foreign currency translation
adjustment |
| | | | (5,768 | ) | (5,768 | ) | ||||||||||||||||
Unrealized loss on investments |
| | | | (32 | ) | (32 | ) | ||||||||||||||||
Net income |
| | | 22,798 | | 22,798 | ||||||||||||||||||
Balance, December 31, 2008 |
23,581,109 | 234 | | 182,882 | (3,277 | ) | 179,839 | |||||||||||||||||
Repurchase of common stock |
(1,409,922 | ) | (14 | ) | (6,364 | ) | (17,057 | ) | | (23,435 | ) | |||||||||||||
Stock option exercises |
130,650 | 1 | 1,661 | | | 1,662 | ||||||||||||||||||
Stock option expense |
| | 5,153 | | | 5,153 | ||||||||||||||||||
Restricted stock issuance/expense |
165,286 | 4 | 3,465 | | | 3,469 | ||||||||||||||||||
Tax effects of stock based
compensation |
| | (1,023 | ) | | | (1,023 | ) | ||||||||||||||||
Foreign currency translation
adjustment |
| | | | 1,225 | 1,225 | ||||||||||||||||||
Unrealized loss on investments |
| | | | (87 | ) | (87 | ) | ||||||||||||||||
Net income |
| | | 16,562 | | 16,562 | ||||||||||||||||||
Balance, December 31, 2009 |
22,467,123 | 225 | 2,892 | 182,387 | (2,139 | ) | 183,365 | |||||||||||||||||
Repurchase of common stock |
(2,766,173 | ) | (28 | ) | (51,380 | ) | (26,296 | ) | | (77,704 | ) | |||||||||||||
Stock option exercises |
1,613,735 | 16 | 36,352 | | | 36,368 | ||||||||||||||||||
Stock option expense |
| | 3,792 | | | 3,792 | ||||||||||||||||||
Restricted stock issuance/expense |
415,104 | 4 | 6,624 | | | 6,628 | ||||||||||||||||||
Tax effects of stock based
compensation |
| | 2,207 | | | 2,207 | ||||||||||||||||||
Foreign currency translation
adjustment |
| | | | 1,012 | 1,012 | ||||||||||||||||||
Unrealized gain on investments |
| | | | 71 | 71 | ||||||||||||||||||
Net income |
| | | 28,061 | | 28,061 | ||||||||||||||||||
Balance, December 31, 2010 |
21,729,789 | $ | 217 | $ | 487 | $ | 184,152 | $ | (1,056 | ) | $ | 183,800 | ||||||||||||
The accompanying notes are an integral part of these Consolidated Statements of Shareholders Equity.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net income |
$ | 28,061 | $ | 16,562 | $ | 22,798 | ||||||
Other comprehensive income (loss), net of tax: |
||||||||||||
Foreign currency translation adjustment |
1,012 | 1,225 | (5,768 | ) | ||||||||
Unrealized gain (loss) on investments, net
of taxes of $43, ($51) and ($18) in 2010,
2009 and 2008, respectively |
71 | (87 | ) | (32 | ) | |||||||
Other comprehensive income (loss) |
1,083 | 1,138 | (5,800 | ) | ||||||||
Comprehensive income |
$ | 29,144 | $ | 17,700 | $ | 16,998 | ||||||
The accompanying notes are an integral part of these Consolidated Statements of Comprehensive Income.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010, 2009 and 2008
1. Organization and Summary of Significant Accounting Policies
Organization and Business
Manhattan Associates, Inc. (Manhattan or the Company) is a developer and provider of
supply chain solutions that help organizations optimize the effectiveness, efficiency, and
strategic advantages of their supply chains. The Companys solutions consist of software, services
and hardware, which coordinate people, workflows, assets, events and tasks holistically across the
functions linked in a supply chain from planning through execution. These solutions also help
coordinate the actions, data exchange and communication of participants in supply chain ecosystems,
such as manufacturers, suppliers, distributors, trading partners, transportation providers,
channels (such as catalogers, store retailers and Web outlets) and consumers.
The Companys operations are in North America, Europe and the Asia/Pacific region. The
European operations are conducted through the Companys wholly-owned subsidiaries, Manhattan
Associates Limited, Manhattan Associates Europe B.V., Manhattan France SARL, and Manhattan
Associates GmbH, in the United Kingdom, the Netherlands, France, and Germany, respectively. The
Companys Asia/Pacific operations are conducted through its wholly-owned subsidiaries, Manhattan
Associates Pty Ltd., Manhattan Associates KK, Manhattan Associates Software (Shanghai), Co. Ltd.,
Manhattan Associates Software Pte Ltd., and Manhattan Associates (India) Development Centre Private
Limited in Australia, Japan, China, Singapore, and India, respectively. The Company occasionally
sells its products and services in other countries, such as countries in Latin America, Eastern
Europe, Middle East, and Asia, through its direct sales channel as well as various reseller
channels.
Principles of Consolidation and Foreign Currency Translation
The accompanying consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
The financial statements of foreign subsidiaries have been translated into United States
dollars in accordance with the foreign currency matters topic in the Financial Accounting Standards
Boards (FASB) Accounting Standards Codification (the Codification). Revenues and expenses from
international operations were denominated in the respective local currencies and translated using
the average monthly exchange rates for the year. All balance sheet accounts have been translated
using the exchange rates in effect at the balance sheet date and the effect of changes in exchange
rates from year to year are disclosed as a separate component of shareholders equity and
comprehensive income.
Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of
three months or less to be cash or cash equivalents.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of
credit risk consist principally of cash and cash equivalents, short- and long-term investments and
accounts receivable. The Company maintains cash and cash equivalents and short- and long-term
investments with various financial institutions. Amounts held at certain financial institutions are
above the federally insured limit. The Companys sales are primarily to companies located in the
United States, Europe and Asia. The Company performs periodic credit evaluations of its customers
financial condition and does not require collateral. Accounts receivable are due principally from
large U.S., European and Asia Pacific companies under stated contract terms. Accounts receivable,
net as of December 31, 2010 for the Americas, EMEA and APAC companies were $40.1 million, $3.7
million and $3.6 million, respectively. Accounts receivable, net as of December 31, 2009 for the
Americas, EMEA and APAC companies were $30.7 million, $4.9 million and $2.3 million, respectively.
The Companys top five customers in aggregate accounted for 10%, 11% and 11% of total revenue in
the period the related sales were recorded for each of the years ended December 31, 2010, 2009 and
2008, respectively. No single customer accounted for more than 10% of revenue in the years ended
December 31, 2010, 2009 and 2008 or for more than 10% of accounts receivable as of December 31,
2010 and 2009.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
Fair Value Measurement
The Company measures its investments based on a fair value hierarchy disclosure framework that
prioritizes and ranks the level of market price observability used in measuring assets and
liabilities at fair value. Market price observability is affected by a number of factors, including
the type of asset or liability and their characteristics. This hierarchy prioritizes the inputs
into three broad levels as follows:
| Level 1Quoted prices in active markets for identical instruments. |
| Level 2Quoted prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and model-derived
valuations in which all significant inputs and significant value drivers are observable in
active markets. |
| Level 3Valuations derived from valuation techniques in which one or more significant
inputs or significant value drivers are unobservable. |
The Companys investments are categorized as available-for-sale securities and recorded at
fair market value. Investments with maturities of 90 days or less from the date of purchase are
classified as cash equivalents; investments with maturities of greater than 90 days from the date
of purchase but less than one year are generally classified as short-term investments; and
investments with maturities of greater than one year from the date of purchase are generally
classified as long-term investments. Unrealized holding gains and losses are reflected as a net
amount in a separate component of shareholders equity until realized. For the purposes of
computing realized gains and losses, cost is determined on a specific identification basis.
At December 31, 2010, the Companys cash, cash equivalent and short-term investments balance
was $89.5 million, $31.2 million and $4.4 million, respectively. Cash equivalents and short-term
investments primarily consist of highly liquid money market funds and certificates of deposit.
Prior to 2008, the Company invested $6.5 million in auction rate securities with original
maturities ranging from 2025 to 2040, but which had auctions to reset the yield every 7 to 35 days.
Certain auctions failed during 2008 and the underlying securities were not redeemed by the issuer.
During 2008, the Company recorded an other-than-temporary impairment charge of $3.5 million on one
of these investments. The Company reduced the carrying value to zero due to credit downgrades of
the underlying issuer and the bond insurer as well as increasing publicly reported exposure to
bankruptcy risk by the issuer. During 2010, two of the issuers of the Companys other auction rate
securities redeemed a total of $1.2 million of the auction rate securities at par value. In January
2011, one of the issuers redeemed the remaining $0.8 million of one of the auction rate securities
at par value. From 2008 to 2010, the Company has recorded net temporary impairment charges of $0.1
million on these investments, inclusive of a $0.1 million unrealized gain recorded during 2010,
resulting in $1.7 million in total auction rate securities investments on the balance sheet at
December 31, 2010. The net unrealized loss is included as a separate component of shareholders
equity and annual unrealized gains and losses are included in total comprehensive income. The $1.7
million of auction rate securities held by the Company at December 31, 2010 were issued by state or
regional educational loan authorities and are collateralized by federally insured student loans.
These investments consequently have high credit ratings, and the Company intends and has the
ability to hold these securities until maturity or until redeemed. In determining the fair values
of these auction rate securities, the Company considered the credit worthiness of the counterparty,
estimates of interest rates, expected holding periods, and the timing and value of expected future
cash flows. Changes in the assumptions underlying the Companys valuation could have a significant
impact on the value of these securities, which may cause losses and potentially require the Company
to record other-than-temporary impairment charges on these investments in the future. The Company
will continue to evaluate the fair value of its investments in auction rate securities each
reporting period for a potential other-than-temporary impairment.
The Companys auction rate securities are classified in the fair value hierarchy as Level 3 as
their valuation technique includes significant unobservable inputs except for the $0.8 million of
auction rate securities redeemed in January 2011 which are classified as Level 1. The Company uses
quoted prices from active markets which are classified at Level 1 as a highest level observable
input in the disclosure hierarchy framework for all other available-for-sale securities. The
Company has no investments classified at Level 2.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
The following table set forth the assets carried at fair value measured on a recurring basis
at December 31, 2010 (in thousands):
Fair Value Measurements at December 31, 2010 Using | ||||||||||||||||
Significant Other | Significant | |||||||||||||||
Quoted Prices | Observable Inputs | Unobservable Inputs | ||||||||||||||
(Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
Money market funds |
$ | 28,788 | $ | | $ | | $ | 28,788 | ||||||||
Auction rate securities |
800 | | 911 | 1,711 | ||||||||||||
Total available-for-sale securities |
$ | 29,588 | $ | | $ | 911 | $ | 30,499 | ||||||||
In July 2003, the Company invested $2.0 million in an RFID technology company. The investment
has been accounted for under the cost method and is included in Other Assets on the consolidated
balance sheets. In the third quarter of 2006, the Company wrote down its investment by $0.3 million
due to uncertainties associated with the fair value of the investment following an unsuccessful
public offering. During the third quarter of 2008, the Company wrote down the remaining balance of
this investment recording an other-than-temporary impairment charge of $1.7 million. The Company
recorded the additional impairment due to a combination of continued negative financial results
reported by this company in a very competitive sector and a down round of financing (i.e., a
round of financing that was dilutive to the Companys investment) in which the Companys preferred
share ownership was converted into common stock, eliminating the Companys preference rights
associated with liquidation, thereby substantially impairing its ability to recoup its investment.
The $1.7 million charge is included in Asset impairment charges in the 2008 Consolidated
Statements of Operations.
Following is a summary of the Companys future available-for-sale investment maturities as of
December 31, 2010 (in thousands):
Less than 1 year |
$ | 800 | ||
Over 10 years |
911 | |||
Total |
$ | 1,711 | ||
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the reporting period.
Significant estimates include the allowance for doubtful accounts, which is based upon an
evaluation of historical amounts written-off, the customers ability to pay and general economic
conditions; the useful lives of intangible assets; self insurance accruals; legal accruals; the
recoverability or impairment of intangible asset values; stock based compensation, which is based
on the expected term of the award and corresponding expected volatility, risk-free interest rate,
and dividends; and the Companys effective income tax rate and deferred tax assets, which are based
upon the Companys expectations of future taxable income, allowable deductions, and projected tax
credits. Actual results will differ from these estimates.
Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and
other financial instruments included in the accompanying Consolidated Balance Sheets approximate
their fair values principally due to the short-term maturities of these instruments. Unrealized
gains and losses on investments are included as a separate component of Accumulated other
comprehensive loss, net of any related tax effect, in the Consolidated Balance Sheets.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
Risks Associated with Single Business Line, Technological Advances, and Foreign Operations
The Company currently derives a substantial portion of its revenues from sales of its software
and related services and hardware. The markets for supply chain execution and supply chain planning
solutions are highly competitive, subject to rapid technological change, changing customer needs,
frequent new product introductions, and evolving industry standards that may render existing
products and services obsolete. As a result, the Companys position in these markets could be
eroded rapidly by unforeseen changes in customer requirements for application features, functions,
and technologies. The Companys growth and future operating results will depend, in part, upon its
ability to enhance existing applications and develop and introduce new applications that meet
changing customer requirements that respond to competitive products and that achieve market
acceptance. Any factor adversely affecting the markets for supply chain execution and supply chain
planning solutions could have an adverse effect on the Companys business, financial condition, and
results of operations.
The Companys international business is subject to risks typical of an international business,
including, but not limited to differing economic conditions, changes in political climate,
differing tax structures, other regulations and restrictions, and foreign exchange rate volatility.
Accordingly, the future results could be materially adversely impacted by changes in these or other
factors. The Company recognized a foreign exchange rate loss of $0.7 million and $1.0 million in
2010 and 2009, respectively, and foreign exchange rate gains of $3.9 million in 2008. Foreign
exchange rate transaction gains and losses are classified in Other (loss) income, net on the
Consolidated Statements of Operations.
Revenue Recognition
The Companys revenue consists of revenues from the licensing and hosting of software, fees
from implementation and training services (collectively, professional services), plus customer
support and software enhancements, and sales of hardware and other revenues (other revenues
consists of reimbursements of out of pocket expenses incurred in connection with the Companys
professional services). All revenue is recognized net of any related sales taxes.
The Company recognizes license revenue when the following criteria are met: (1) a signed
contract is obtained; (2) delivery of the product has occurred; (3) the license fee is fixed or
determinable; and (4) collection is probable. Revenue recognition for software with
multiple-element arrangements requires recognition of revenue using the residual method when (a)
there is vendor-specific objective evidence of the fair values of all undelivered elements in a
multiple-element arrangement that is not accounted for using long-term contract accounting; (b)
vendor-specific objective evidence of fair value does not exist for one or more of the delivered
elements in the arrangement; and (c) all other applicable revenue-recognition criteria for
software revenue recognition, other than the requirement for vendor-specific objective evidence of
the fair value of each delivered element of the arrangement, are satisfied. For those contracts
that contain significant customization or modifications, license revenue is recognized using
contract accounting.
The Company allocates revenue to customer support and software enhancements and any other
undelivered elements of the arrangement based on vendor specific objective evidence, or VSOE, of
fair value of each element and such amounts are deferred until the applicable delivery criteria
and other revenue recognition criteria have been met. The balance of the revenue, net of any
discounts inherent in the arrangement, is recognized at the outset of the arrangement using the
residual method as the product licenses are delivered. If the Company cannot objectively determine
the fair value of each undelivered element based on the VSOE of fair value, the Company defers
revenue recognition until all elements are delivered, all services have been performed, or until
fair value can be objectively determined. The Company must apply judgment in determining all
elements of the arrangement and in determining the VSOE of fair value for each element,
considering the price charged for each product on a stand-alone basis or applicable renewal rates.
The accounting related to license revenue recognition in the software industry is complex and
affected by interpretations of the rules which are subject to change. Judgment is required in
assessing the probability of collection, which is generally based on evaluation of
customer-specific information, historical collection experience and economic market conditions. If
market conditions decline, or if the financial conditions of customers deteriorate, the Company may
be unable to determine that collectibility is probable, and the Company could be required to defer
the recognition of revenue until the Company receives customer payments.
The Companys services revenue consists of fees generated from professional services, customer
support services and software enhancements related to the Companys software products. Fees from
professional services performed by the Company are generally billed on an hourly basis, and revenue
is recognized as the services are performed. Professional services are sometimes rendered under
agreements in which billings are limited to contractual maximums or based upon a fixed-fee for
portions of or all of the engagement. Revenue related to fixed-fee based contracts is recognized on
a proportional performance basis based on the hours incurred on discrete projects within an overall
services arrangement. Project losses are provided for in their entirety in the period in which they
become known. Revenue related to customer support services and software enhancements are generally
paid in advance and recognized ratably over the term of the agreement, typically 12 months.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
Hardware revenue is generated from the resale of a variety of hardware products, developed and
manufactured by third parties, that are integrated with and complementary to the Companys software
solutions. As part of a complete solution, the Companys customers frequently purchase hardware
from the Company in conjunction with the licensing of software. These products include computer
hardware, radio frequency terminals networks, RFID chip readers, bar code printers and scanners,
and other peripherals. Hardware revenue is recognized upon shipment to the customer when title
passes. The Company generally purchases hardware from its vendors only after receiving an order
from a customer. As a result, the Company does not maintain hardware inventory.
In accordance with the other presentation matters within the Revenue Recognition Topic of the
FASB Accounting Standards Codification, the Company recognizes amounts associated with
reimbursements from customers for out-of-pocket expenses as revenue. Such amounts have been
classified in Hardware and other revenue in the accompanying Consolidated Statement of
Operations. The total amount of expense reimbursement recorded to revenue was $9.0 million, $7.5
million and $12.7 million for 2010, 2009 and 2008, respectively.
Deferred Revenue
Deferred revenue represents amounts collected prior to having completed performance of
professional services, customer support services and software enhancements and significant
remaining obligations under license agreements. The Company generally expects to complete such
services or obligations within the next twelve months.
Returns and Allowances
The Company has not experienced significant returns or warranty claims to date and, as a
result, has not recorded a provision for the cost of returns and product warranty claims at
December 31, 2010 or 2009.
The Company records an allowance for doubtful accounts based on the historical experience of
write-offs and a detailed assessment of accounts receivable. Additions to the allowance for
doubtful accounts generally represent a sales allowance on services revenue, which are recorded to
operations as a reduction to services revenue. The total amounts charged to operations were $3.5
million, $3.6 million and $4.9 million for 2010, 2009 and 2008, respectively. In estimating the
allowance for doubtful accounts, management considers the age of the accounts receivable, the
Companys historical write-offs, and the credit worthiness of the customer, among other factors.
Should any of these factors change, the estimates made by management will also change accordingly,
which could affect the level of the Companys future allowances. Uncollectible accounts are written
off when it is determined that the specific balance is not collectible.
Property and Equipment
Property and equipment is recorded at cost and consists of furniture, computers, other office
equipment, internal use software, and leasehold improvements. The Company depreciates the cost of
furniture, computers, other office equipment and internal use software on a straight-line basis
over their estimated useful lives (three to five years for computer equipment and software, five
years for office equipment, seven years for furniture). Leasehold improvements are depreciated over
the lesser of their useful lives or the term of the lease. Depreciation and amortization expense
for property and equipment for the years ended December 31, 2010, 2009 and 2008 was approximately
$6.9 million, $8.4 million and $9.4 million, respectively, and was included in Depreciation and
amortization in the Consolidated Statements of Operations.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
Property and equipment, at cost, consist of the following (in thousands):
December 31, | ||||||||
2010 | 2009 | |||||||
Computer equipment and software |
$ | 50,574 | $ | 47,151 | ||||
Furniture and office equipment |
7,165 | 7,539 | ||||||
Leasehold improvement |
14,961 | 14,827 | ||||||
72,700 | 69,517 | |||||||
Less accumulated depreciation and amortization |
(57,867 | ) | (53,758 | ) | ||||
$ | 14,833 | $ | 15,759 | |||||
Acquisition-Related Intangible Assets
Acquisition-related intangible assets are stated at historical cost and include acquired
software and certain other intangible assets with definite lives. The acquired software is being
amortized over the greater of the amount computed using (a) the ratio that current gross revenues
bear to the total of current and anticipated future gross revenues for each product or (b) the
straight-line method over the remaining estimated economic life of the product including the period
being reported on. The weighted average amortization period for acquired software is 4.9 years. The
other intangible assets are being amortized on a straight-line basis over a period of two to ten
years with a weighted average amortization period of 6.2 years. The weighted average amortization
period for all intangible assets is 5.6 years. Total amortization expense related to
acquisition-related intangible assets was approximately $2.3 million, $3.0 million and $3.3 million
for the years ended December 31, 2010, 2009 and 2008, respectively, and are included in
Depreciation and amortization in the accompanying Consolidated Statements of Operations.
Acquisition-Related Intangible Assets consist of the following (in thousands):
December 31, | ||||||||
2010 | 2009 | |||||||
Cost: |
||||||||
Acquired software |
$ | 15,791 | $ | 15,791 | ||||
Other intangible assets with definite lives |
19,087 | 19,087 | ||||||
34,878 | 34,878 | |||||||
Accumulated amortization: |
||||||||
Acquired software |
(15,791 | ) | (15,259 | ) | ||||
Other intangible assets with definite lives |
(17,901 | ) | (16,146 | ) | ||||
(33,692 | ) | (31,405 | ) | |||||
Net book value: |
||||||||
Acquired software |
$ | | $ | 532 | ||||
Other intangible assets with definite lives |
1,186 | 2,941 | ||||||
$ | 1,186 | $ | 3,473 | |||||
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
The Company expects amortization expense for the next five years to be as follows based on
intangible assets as of December 31, 2010 (in thousands):
Year ending December 31, | ||||
2011 |
$ | 1,172 | ||
2012 |
7 | |||
2013 |
6 | |||
2014 |
1 | |||
Total amortization expense expected |
$ | 1,186 | ||
Goodwill
Goodwill represents the excess of purchase price over fair value of net identified tangible
and intangible assets and liabilities acquired. The Company does not amortize goodwill, but instead
tests goodwill for impairment on at least an annual basis. Goodwill was $62.3 million at the end of
each year ended December 31, 2010 and 2009. Approximately $36.0 million of the gross Goodwill
balance is deductible for income tax purposes. To date, there have been no goodwill impairments.
The change in the balance from December 31, 2009 to 2010 is due to foreign exchange fluctuations in
EMEA.
Software Development Costs
Research and development expenses are charged to expense as incurred. The Company determines
the amount of development costs capitalizable under the provisions of FASB Codification accounting
for costs of computer software to be sold, leased, or marketed. Under this guidance, computer
software development costs are charged to research and development expense until technological
feasibility is established, after which remaining software production costs are capitalized. The
Company has defined technological feasibility as the point in time at which the Company has a
detailed program design or a working model of the related product, depending on the type of
development efforts. For the years ended December 31, 2010, 2009 and 2008, the Company capitalized
no internal research and development costs because the costs incurred between the attainment of
technological feasibility for the related software product through the date when the product was
available for general release to customers has been insignificant.
Impairment of Long-Lived and Intangible Assets
The Company reviews the values assigned to long-lived assets, including property and certain
intangible assets, to determine whether events and circumstances have occurred which indicate that
the remaining estimated useful lives may warrant revision or that the remaining balances may not be
recoverable. In such reviews, undiscounted cash flows associated with these assets are compared
with their carrying value to determine if a write-down to fair value is required. During 2010, 2009
and 2008, the Company did not recognize any impairment charges associated with its long-lived or
intangible assets.
The evaluation of asset impairment requires management to make assumptions about future cash
flows over the life of the asset being evaluated. These assumptions require significant judgment,
and actual results may differ from assumed and estimated amounts.
Impairment of Goodwill
The Company evaluates the carrying value of goodwill annually as of December 31 and between
annual evaluations if events occur or circumstances change that would more likely than not reduce
the fair value of the reporting unit below its carrying amount. Such circumstances could include,
but are not limited to, (1) a significant adverse change in legal factors or in business climate,
(2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When
evaluating whether the goodwill is impaired, the Company compares the fair value of the reporting
unit to which the goodwill is assigned to its carrying amount, including goodwill. If the carrying
amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be
measured. The impairment loss would be calculated by comparing the implied fair value of reporting
unit goodwill to its carrying amount. In calculating the implied fair value of goodwill, the fair
value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the
amount assigned to its other assets and liabilities is the implied fair value of goodwill. The
Company performed its periodic review of its goodwill for impairment as of December 31, 2010, 2009
and 2008 and did not identify any impairment as a result of the review.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
Guarantees and Indemnifications
The Company accounts for guarantees in accordance with the guarantee accounting topic in the
FASB Codification. The Companys sales agreements with customers generally contain infringement
indemnity provisions. Under these agreements, the Company agrees to indemnify, defend and hold
harmless the customer in connection with patent, copyright or trade secret infringement claims made
by third parties with respect to the customers authorized use of the Companys products and
services. The indemnity provisions generally provide for the Companys control of defense and
settlement and cover costs and damages finally awarded against the customer, as well as the
Companys modification of the product so it is no longer infringing or, if it cannot be corrected,
return of the product for a refund. The sales agreements with customers sometimes also contain
indemnity provisions for death, personal injury or property damage caused by the Companys
personnel or contractors in the course of performing services to customers. Under these agreements,
the Company agrees to indemnify, defend and hold harmless the customer in connection with death,
personal injury and property damage claims made by third parties with respect to actions of the
Companys personnel or contractors. The indemnity provisions generally provide for the Companys
control of defense and settlement and cover costs and damages finally awarded against the customer.
The indemnity obligations contained in sales agreements generally have no specified expiration date
and no specified monetary limitation on the amount of award covered. The Company has not previously
incurred costs to settle claims or pay awards under these indemnification obligations. The Company
accounts for these indemnity obligations in accordance with the guarantee accounting topic in the
Codification, and records a liability for these obligations when a loss is probable and reasonably
estimable. The Company has not recorded any liabilities for these agreements as of December 31,
2010 and 2009.
The Company warrants to its customers that its software products will perform in all material
respects in accordance with the standard published specifications in effect at the time of delivery
of the licensed products to the customer for 6 months after first use of the licensed products, but
no more than 24 months after execution of the license agreement. Additionally, the Company warrants
to its customers that services will be performed consistent with generally accepted industry
standards or specific service levels through completion of the agreed upon services. If necessary,
the Company will provide for the estimated cost of product and service warranties based on specific
warranty claims and claim history. However, the Company has not incurred significant recurring
expense under product or service warranties. As a result, the Company believes the estimated fair
value of these agreements is nominal. Accordingly, the Company has no liabilities recorded for
these agreements as of December 31, 2010 and 2009.
Segment Information
The Company has three reporting segments: Americas, EMEA, and APAC as defined by FASB
Codification topic for segment reporting. See Note 8 for discussion of the Companys reporting
segments.
Advertising Costs
Advertising costs are expensed as incurred and totaled approximately $10,000 for each year in
2010 and 2009 and $100,000 in 2008. Advertising costs are included in Sales and marketing in the
Consolidated Statements of Operations.
Basic and Diluted Net Income Per Share
Basic net income per share is computed using net income divided by the weighted average number
of shares of common stock outstanding (Weighted Shares) for the period presented.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
Diluted net income per share is computed using net income divided by Weighted Shares, and the
treasury stock method effect of common equivalent shares (CESs) outstanding for each period
presented. The following is a reconciliation of the shares used in the computation of net income
per share for the years ended December 31, 2010, 2009 and 2008 (in thousands, except per share
data):
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Net income |
$ | 28,061 | $ | 16,562 | $ | 22,798 | ||||||
Earnings per share: |
||||||||||||
Basic |
$ | 1.31 | $ | 0.74 | $ | 0.95 | ||||||
Effect of CESs |
(0.06 | ) | (0.01 | ) | (0.01 | ) | ||||||
Diluted |
$ | 1.25 | $ | 0.73 | $ | 0.94 | ||||||
Weighted average number of shares: |
||||||||||||
Basic |
21,497 | 22,385 | 24,053 | |||||||||
Effect of CESs |
953 | 173 | 275 | |||||||||
Diluted |
22,450 | 22,558 | 24,328 |
Options to purchase 1,312,639 shares, 5,199,401 shares and 4,177,687 shares of common stock
were outstanding at December 31, 2010, 2009 and 2008, respectively, but were not included in the
computation of diluted earnings per share because the options exercise price was greater than the
average market price of the common shares during the respective years. See Note 2 for further
information on those securities.
Accumulated Other Comprehensive Income
Comprehensive income includes net income, foreign currency translation adjustments and
unrealized gains and losses on investments that are excluded from net income and reflected in
shareholders equity.
The following table sets forth the components of accumulated other comprehensive income (in
thousands):
December 31, | ||||||||
2010 | 2009 | |||||||
Unrealized loss on investments, net of taxes |
$ | (61 | ) | $ | (132 | ) | ||
Foreign currency translation adjustment |
(995 | ) | (2,007 | ) | ||||
Total |
$ | (1,056 | ) | $ | (2,139 | ) | ||
New Accounting Pronouncements
In January 2010, the FASB issued an Accounting Standard Update to improve disclosures about
fair value measurements. This guidance requires enhanced disclosures regarding transfers in and
out of the levels within the fair value hierarchy. Separate disclosures are required for
significant transfers in and out of Level 1 and 2 in the fair value hierarchy and the reasons for
the transfers. This guidance also requires disclosures relating to the reconciliation of fair
value measurements using significant unobservable inputs (Level 3) investments. The new
disclosures and clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009 except Level 3 reconciliation disclosures which
are effective for the fiscal years and interim periods beginning after December 15, 2010. The
Company adopted the enhanced disclosures for Level 1 and 2 in its first quarter of 2010 reporting,
which did not have a material impact on its financial statements. The Company does not expect the
Level 3 reconciliation disclosures to have a material impact on its financial statements when the
Company adopts them.
In February 2010, the FASB issued an Accounting Standards Update to amend certain recognition
and disclosure requirements related to subsequent events. The new guidance clarifies that
management must evaluate, as of each reporting period, events or transactions that occur after the
balance sheet date through the date that the financial statements are issued. Management must
perform its assessment for both interim and annual financial reporting periods. This update also
exempts SEC filers from disclosing the date through which subsequent events have been evaluated.
The adoption of this amended standard did not have an impact on the Companys consolidated
financial statements.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
2. Stock-Based Compensation
Stock Based Compensation Plans
The Manhattan Associates, Inc. 1998 Stock Incentive Plan (the 1998 Plan) was adopted by the
Board of Directors and approved by the shareholders in February 1998. Options granted under the
1998 Plan cannot have a term exceeding ten years. Options typically have an annual graded vesting
schedule over four years and vest based on service conditions. Following approval of the Manhattan
Associates, Inc. 2007 Stock Incentive Plan (the 2007 Plan) discussed below, the Company may not
make any additional awards under the 1998 Plan.
The 2007 Plan was initially approved by the shareholders of the Company in May 2007, and an
amendment was approved in May 2009. The 2007 Plan provides for the grant of stock options,
restricted stock, restricted stock units and stock appreciation rights. Vesting conditions can be
service-based or performance-based, or a combination of both.
As amended, a maximum of 4,700,000 shares are available for grant under the 2007 Plan. Each
grant of a stock option or stock appreciation right is counted against the maximum share limitation
as one share; and each grant of a restricted stock award or restricted stock unit award (including
performance-based shares) count against the maximum share limitation as two shares. Options and
stock appreciation rights cannot have a term exceeding seven years. As of December 31, 2010,
there were 1,594,226 shares available for issuance under the amended 2007 Plan. As of February 16,
2011, after the Companys annual award to its employees, there were 995,311 shares available for
grant under the amended 2007 Plan.
The 1998 and 2007 Plans are administered by the Compensation Committee of the Board of
Directors. The committee has the authority to interpret the provisions thereof.
Stock Option Awards
The Company recorded stock option expense of $3.8 million, $5.2 million and $5.5 million
during the year ended December 31, 2010, 2009 and 2008, respectively. A summary of changes in
outstanding options for the year ended December 31, 2010 is as follows:
Weighted | Average | |||||||||||||||
Weighted | Average | Intrinsic | ||||||||||||||
Number of | Average | Remaining | Value (in | |||||||||||||
Shares | Exercise Price | Contractual Term | thousands) | |||||||||||||
Outstanding at January 1, 2010 |
5,768,961 | $ | 25.29 | |||||||||||||
Granted |
17,500 | 24.81 | ||||||||||||||
Exercised |
(1,613,735 | ) | 22.54 | |||||||||||||
Forfeited and expired |
(326,464 | ) | 41.66 | |||||||||||||
Outstanding at December 31, 2010 |
3,846,262 | $ | 25.06 | 3.2 | $ | 21,759 | ||||||||||
Vested or expected to vest at December 31, 2010 |
3,497,840 | $ | 25.26 | 3.2 | $ | 19,149 | ||||||||||
Exercisable at December 31, 2010 |
3,106,607 | $ | 25.86 | 3.0 | $ | 15,219 |
As of February 16, 2011, there were 3,610,413 options outstanding with a weighted average
exercise price of $24.99 per share and a weighted average remaining contractual life of 3.1 years.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
The fair value of each option award is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted-average assumptions for the years ended December
31, 2010, 2009, and 2008:
2010 | 2009 | 2008 | ||||||||||
Dividend yield |
0 | % | 0 | % | 0 | % | ||||||
Expected volatility |
36 | % | 38 | % | 35 | % | ||||||
Risk-free interest rate at the date of grant |
2.4 | % | 1.9 | % | 2.8 | % | ||||||
Expected life (in years) |
4.0 | 4.0 | 4.0 |
Expected volatilities are based on a combination of historical volatility of the Companys
stock and implied volatility of the Companys publicly traded stock options. Due to the limited
trading volume of the Companys publicly traded options, the Company places a greater emphasis on
historical volatility. The Company also uses historical data to estimate the term that options are
expected to be outstanding and the forfeiture rate of options granted. The risk-free interest rate
is based on the U.S. Treasury zero-coupon issues with a term approximating the expected term. Using
these assumptions, the weighted average grant-date fair values of the stock options granted during
the years ended December 31, 2010, 2009 and 2008 were $7.82, $5.26 and $7.96, respectively.
Options with graded vesting are valued as a single award. The total value of the award is
expensed on a straight line basis over the vesting period with the amount of compensation cost
recognized at any date at least equal to the portion of the grant-date fair value of the award that
is vested at that date. The total intrinsic value of options exercised during the years ended
December 31, 2010, 2009, and 2008 based on market value at the exercise dates was $11.9 million,
$0.9 million, and $1.6 million, respectively. As of December 31, 2010, unrecognized compensation
cost related to unvested stock option awards totaled $2.6 million and is expected to be recognized
over a weighted average period of approximately one year.
Restricted Stock Awards
A summary of changes in unvested shares of restricted stock for the year ended December 31,
2010 are as follows:
Number of | Grant Date Fair | |||||||
Shares | Value | |||||||
Outstanding at January 1, 2010 |
388,560 | $ | 22.48 | |||||
Granted |
437,360 | 22.23 | ||||||
Vested |
(145,518 | ) | 24.03 | |||||
Forfeited |
(22,256 | ) | 20.87 | |||||
Outstanding at December 31, 2010 |
658,146 | $ | 22.02 | |||||
As of February 16, 2011, after the Companys annual award to its employees, there were 771,909
shares of restricted stock outstanding.
The Company recorded restricted stock expense of $6.6 million, $3.5 million and $3.4 million
during the year ended December 31, 2010, 2009 and 2008, respectively. The total fair value of
restricted stock awards vested during the years ended December 31, 2010, 2009, and 2008 based on
market value at the vesting dates was $3.6 million, $2.2 million and $2.1 million, respectively. As
of December 31, 2010, unrecognized compensation cost related to unvested restricted stock awards
totaled $7.7 million and is expected to be recognized over a weighted average period of
approximately 1.25 years.
In January 2010 the Compensation Committee approved certain changes to the Companys
historical equity incentive grant practices, with the objective to optimize the Companys
performance and retention strength while managing program share usage to improve long-term equity
overhang. The changes eliminate stock option awards in favor of 100% restricted stock grants,
which for the 2010 awards contain vesting provisions that are 50% service-based and 50%
performance-based. The 2010 awards have a four year graded vesting period, with the performance portion tied to 2010 revenue and earnings per
share targets. The Company recognizes compensation cost for service-based restricted awards with
graded vesting on a straight-line basis over the entire vesting period, with the amount of
compensation cost recognized at any date at least equal to the portion of the grant-date value of
the award that is vested at that date. For its performance-based restricted stock awards with
graded vesting, the Company recognizes compensation cost on an accelerated basis applying
straight-line expensing for each separately vesting portion of each award.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
Included in the restricted stock grants for the year ended December 31, 2010 are 187,095
shares that have performance-based vesting criteria. As noted above, the performance criteria are
tied to the Companys 2010 financial performance. As of December 31, 2010, the performance
criteria for the fiscal year were met and the associated stock-based compensation has been
recognized.
3. Income Taxes
The Company is subject to future federal and state income taxes and has recorded
net deferred tax assets on the Consolidated Balance Sheets at December 31, 2010 and 2009. Deferred
tax assets and liabilities are determined based on the difference between the financial accounting
and the tax bases of assets and liabilities. Significant components of the Companys deferred tax
assets and liabilities as of December 31, 2010 and 2009 are as follows (in thousands):
December 31, | ||||||||
2010 | 2009 | |||||||
Deferred tax assets: |
||||||||
Accounts receivable |
$ | 1,967 | $ | 1,726 | ||||
Accrued liabilities |
5,372 | 2,998 | ||||||
Stock compensation expense |
6,617 | 6,022 | ||||||
Capitalized costs |
5,721 | 7,219 | ||||||
Accrued sales taxes |
810 | 1,073 | ||||||
Deferred rent |
2,921 | 3,036 | ||||||
State tax credits |
2,383 | 2,144 | ||||||
Net operating losses |
3,147 | 3,338 | ||||||
Valuation allowance |
(7,689 | ) | (7,887 | ) | ||||
Other |
221 | 386 | ||||||
$ | 21,470 | $ | 20,055 | |||||
Deferred tax liabilities: |
||||||||
Intangible assets |
3,518 | 2,866 | ||||||
Depreciation |
1,725 | 1,512 | ||||||
Other |
197 | 106 | ||||||
5,440 | 4,484 | |||||||
Net deferred tax assets |
$ | 16,030 | $ | 15,571 | ||||
The components of income from domestic and foreign operations before income tax expense for
the years ended December 31, 2010, 2009 and 2008 are as follows (in thousands):
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Domestic |
$ | 36,881 | $ | 19,709 | $ | 23,942 | ||||||
Foreign |
4,903 | 677 | 7,566 | |||||||||
Total |
$ | 41,784 | $ | 20,386 | $ | 31,508 | ||||||
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
The components of the income tax provision for the years ended December 31, 2010, 2009 and
2008 are as follows (in thousands):
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Current: |
||||||||||||
Federal |
$ | 11,271 | $ | 1,079 | $ | 7,240 | ||||||
State |
1,296 | (277 | ) | 520 | ||||||||
Foreign |
1,817 | 1,132 | 2,565 | |||||||||
14,384 | 1,934 | 10,325 | ||||||||||
Deferred: |
||||||||||||
Federal |
(694 | ) | 1,713 | (2,059 | ) | |||||||
State |
(29 | ) | 274 | 113 | ||||||||
Foreign |
62 | (97 | ) | 331 | ||||||||
(661 | ) | 1,890 | (1,615 | ) | ||||||||
Total |
$ | 13,723 | $ | 3,824 | $ | 8,710 | ||||||
The income tax benefits related to the exercise of stock options were approximately $2.2
million, $1.0 million, and $0.2 million, for the years ended December 31, 2010, 2009 and 2008,
respectively.
As a result of losses in foreign locations, the Company has net operating loss carry-forwards
(NOLs) of approximately $10.6 million available to offset future income. Approximately $8.4
million of the NOLs expire in 2011 to 2016, and the remainder do not expire. The Company has
established a valuation allowance for substantially all of these NOLs because the ability to
utilize them is uncertain.
The Company has tax credit carry-forwards of approximately $3.8 million available to offset
future state tax. These tax credit carry-forwards expire in 2017 to 2020. A valuation allowance
of $3.6 million has been established for these credits because the ability to use them is
uncertain.
The Company currently has a tax holiday in India under the Software Technology Park of India
Plan through March 2011. As a result of this holiday, the Company had pre-tax income of
approximately $3.7 million, $2.4 million, and $3.8 million, for the years ended December 31, 2010,
2009 and 2008, respectively, that was not subject to corporate income tax. Separately, the Company
is subject to Indias Minimum Alternative Tax (MAT) and accordingly, incurred income tax expense
of approximately $0.7 million, $0.4 million and $0.7 million in 2010, 2009 and 2008, respectively.
The Companys income tax savings as a result of the tax holiday was approximately $0.5 million,
$0.4 million and $0.7 million in 2010, 2009 and 2008, respectively or $0.02, $0.02, and $0.03 per
diluted share in 2010, 2009, and 2008, respectively.
Deferred taxes are not provided for temporary differences of approximately $22.2 million,
$17.5 million, and $17.7 million as of December 31, 2010, 2009, and 2008, respectively,
representing earnings of non-U.S. subsidiaries that are intended to be permanently reinvested.
Those earnings are considered to be indefinitely reinvested; accordingly, no provision for U.S.
Federal and state income taxes has been provided thereon. Upon repatriation of those earnings, in
the form of dividends or otherwise, the Company would be subject to both U.S. income taxes (subject
to adjustment for foreign tax credits) and withholding taxes payable to various foreign countries.
It is impractical to calculate the tax impact until that occurs.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
The following is a summary of the items that cause recorded income taxes to differ from
taxes computed using the statutory federal income tax rate for the years ended December 31, 2010,
2009 and 2008:
Year Ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Statutory federal income tax rate |
35.0 | % | 35.0 | % | 35.0 | % | ||||||
Effect of: |
||||||||||||
State income tax, net of federal benefit |
1.2 | 1.1 | 1.4 | |||||||||
State credit carryforwards |
(0.6 | ) | (3.3 | ) | (4.7 | ) | ||||||
Incentive stock options |
(0.7 | ) | 1.0 | 0.1 | ||||||||
Foreign operations |
(0.8 | ) | 2.4 | (0.9 | ) | |||||||
Tax exempt income |
(0.1 | ) | (0.2 | ) | (1.2 | ) | ||||||
Tax contingencies |
0.7 | (10.8 | ) | (11.9 | ) | |||||||
Other permanent differences |
(3.0 | ) | (5.1 | ) | (3.2 | ) | ||||||
Foreign distributions |
| (1.6 | ) | 2.0 | ||||||||
Change in valuation allowance |
1.1 | 0.3 | 11.0 | |||||||||
Income taxes |
32.8 | % | 18.8 | % | 27.6 | % | ||||||
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as
follows for the years ended December 31, 2010, 2009 and 2008 (in thousands):
December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Unrecognized tax benefits at January 1, |
$ | (2,331 | ) | $ | (3,250 | ) | $ | (5,195 | ) | |||
Gross amount of increases in unrecognized tax benefits as a result of tax positions taken during a prior period |
(527 | ) | (294 | ) | | |||||||
Gross amount of decreases in unrecognized tax benefits as a result of tax positions taken during a prior period |
360 | | | |||||||||
Gross amount of increases in unrecognized tax benefits as a result of tax positions
taken during the current period |
(227 | ) | (939 | ) | (327 | ) | ||||||
Amounts of decreases in the unrecognized tax benefits relating to settlements
with taxing authorities |
159 | | 55 | |||||||||
Reductions to unrecognized tax benefits as a result of a lapse of the applicable
statute of limitations |
131 | 2,152 | 2,217 | |||||||||
Unrecognized tax benefits at December 31, |
$ | (2,435 | ) | $ | (2,331 | ) | $ | (3,250 | ) | |||
The Companys unrecognized tax benefits totaled $2.4 million, $2.3 million and $3.3
million for the year ended December 31, 2010, 2009 and 2008, respectively, of which substantially
all, if recognized, would affect the effective tax rate.
The Company recognizes potential accrued interest and penalties to unrecognized tax benefits
within its global operations in income tax expense. For the years ended December 31, 2010, 2009
and 2008, the Company recognized $0.2 million, $0.1 million, and ($0.2) million, respectively, of
expense (benefits) for the potential payment of interest and penalties. Accrued interest and
penalties were $0.4 million and $0.2 million as of December 31, 2010 and 2009 respectively. The
Company conducts business globally and, as a result, files income tax returns in the United State
Federal jurisdiction and in many state and foreign jurisdictions. The Company is generally no
longer subject to U.S. Federal, state and local, or non-US income tax examinations for the years
before 2007. Due to the expiration of statutes of limitations in multiple jurisdictions globally
during 2011, the Company anticipates it is reasonably possible that unrecognized tax benefits may
decrease by $0.4 million related primarily to subsidiary operations and jurisdictional taxable
income amounts.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
The Internal Revenue Service will commence an examination of the Companys U.S. Federal income
tax return for 2008 in the first quarter of 2011. It is anticipated that the examination will not
be completed within the next twelve months.
4. Shareholders Equity
During 2010, 2009, and 2008, the Company purchased 2,716,621 shares, 1,371,038 shares and
1,705,614 shares of the Companys common stock for approximately $76.5 million, $22.8 million and
$35.0 million, respectively, through open market transactions as part of a publicly-announced
buy-back program. In January 2011, the Board of Directors increased the remaining share repurchase
authority to $50.0 million.
5. Commitments and Contingencies
Leases
Rents charged to expense were approximately $5.3 million, $6.1 million, and $7.2 million for
the years ended December 31, 2010, 2009 and 2008, respectively. During the first quarter of 2007,
the Company extended its Atlanta Headquarters lease, which was set to expire in March 2008, to
September 30, 2018. The landlord funded leasehold improvements of $7.9 million in conjunction with
the new lease which was recorded as an increase in leasehold improvements and deferred rent.
Additionally, the Company had a rent holiday from April to September 2008. The entire cash rent
obligation is being amortized to expense on a straight line basis over the lease term.
Aggregate future minimum lease payments under the noncancellable operating leases as of
December 31, 2010 are as follows (in thousands):
Year Ending December 31, | ||||
2011 |
$ | 6,333 | ||
2012 |
5,542 | |||
2013 |
5,198 | |||
2014 |
5,011 | |||
2015 |
4,799 | |||
Thereafter |
13,480 | |||
Total minimum payments required |
$ | 40,363 | ||
There are no future minimum lease payments under capital leases as of December 31, 2010.
Employment Agreements
The Company has entered into employment agreements with certain executives and other key
employees. The agreements provide for total severance payments of up to approximately $2.8 million
for termination of employment for any reason other than cause. Pursuant to these agreements,
payments would be made in equal monthly installments over a period of not more than 18 months. No
amounts have been accrued because the payments are not probable and cannot be reasonably estimated.
Legal and Other Matters
From time to time, the Company may be involved in litigation relating to claims arising out of
its ordinary course of business. Many of the Companys installations involve products that are
critical to the operations of its clients businesses. Any failure in a Company product could
result in a claim for substantial damages against the Company, regardless of the Companys
responsibility for such failure. Although the Company attempts to limit contractually its liability
for damages arising from product failures or negligent acts or omissions, there can be no assurance
the limitations of liability set forth in its contracts will be enforceable in all instances. The
Company is not presently involved in any material litigation. However, it is involved in various
legal proceedings. The Company believes that any liability that may arise as a result of these
proceedings will not have a material adverse effect on its financial condition, results of
operations, or cash flows. The Company expenses legal costs associated with loss contingencies as
such legal costs are incurred.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
6. Employee Benefit Plan
The Company sponsors the Manhattan Associates 401(k) Plan and Trust (the 401(k) Plan), a
qualified profit sharing plan with a 401(k) feature covering substantially all employees of the
Company. Under the 401(k) Plans deferred compensation arrangement, eligible employees who elect to
participate in the 401(k) Plan may contribute up to 60% of eligible compensation up to $16,500, as
defined, to the 401(k) Plan. On January 1, 2008, the Internal Revenue Service raised the eligible
compensation limit to $245,000. During the second quarter of 2009, the Company suspended its 401(k)
matching contribution for the remainder of 2009 and full year 2010. During the years ended
December 31, 2009 and 2008 the Company made matching contributions to the 401(k) Plan of $0.8
million and $2.3 million, respectively. In 2011, the Company reinstated its matching contribution
program, which provides for a 25% matching contribution up to 6% of eligible compensation being
contributed after the participants first year of employment.
7. Restructuring charge
In the second quarter of 2009, the Company committed to and initiated plans to reduce its
workforce by approximately 140 positions along with other expense reduction initiatives to realign
its capacity. This action was based on continued deterioration of the global macro-economic
environment in the first quarter as reflected by downward revisions by most economists of global
GDP growth rates, which resulted in lower than planned first quarter 2009 license revenue results
and a revised revenue outlook for the remainder of 2009. As a result of this initiative, the
Company recorded a pre-tax restructuring charge of $3.8 million ($2.5 million after-tax or $0.11
per fully diluted share) in 2009. In addition, in the first quarter of 2009, the Company recorded
additional employee severance expense of $63,000 pre-tax, or $42,000 after-tax, related to the
restructuring action taken in the fourth quarter of 2008, as discussed below.
During the quarter ended December 31, 2008, the Company committed to and initiated plans to
reduce our workforce by approximately 170 positions to realign our capacity with demand forecasts.
As a result of this action, we recorded employee severance expense and outplacement service fees of
approximately $4.7 million pretax ($3.0 million after-tax or $0.13 per fully diluted share) in the
fourth quarter of 2008.
The restructuring charges related to both of these matters are classified in Restructuring
charge in the Companys Consolidated Statements of Operations.
The following table summarizes the segment activity in the restructuring accrual for the year
ended December 31, 2010 (in thousands):
Americas | EMEA | APAC | Consolidated | |||||||||||||
Restructuring accrual balance at December 31, 2009 |
$ | 255 | $ | | $ | | $ | 255 | ||||||||
Cash payments |
(192 | ) | | | (192 | ) | ||||||||||
Restructuring accrual balance at December 31, 2010 |
$ | 63 | $ | | $ | | $ | 63 | ||||||||
The balance at December 31, 2010 is included in Accrued compensation and benefits in
the Companys Consolidated Balance Sheets. The majority of the remaining balance is expected to be
paid during 2011.
8. Reporting Segments
The Company manages the business by geographic segment. The Company has identified three
geographic reportable segments: the Americas, EMEA and APAC. All segments derive revenue from the
sale and implementation of the Companys supply chain execution and planning solutions, of which
the individual products are similar in nature and help companies manage the effectiveness and
efficiency of their supply chain. The Company uses the same accounting policies for each reporting
segment. The chief executive officer and chief financial officer evaluate performance based on
revenue and operating results for each region.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
The Americas segment charges royalty fees to the other segments based on software licenses sold by
those reporting segments. The royalties, which totaled $2.5 million, $1.3 million and $3.5 million
in 2010, 2009 and 2008, respectively, are included in cost of revenue for each segment with a
corresponding reduction in Americas cost of revenue. The revenues represented below are from
external customers only. The geographical-based costs consist of costs of professional services
personnel, direct sales and marketing expenses, cost of infrastructure to support the employees and
customer base, billing and financial systems and management and support team. There are certain
corporate expenses included in the Americas region that are not charged to the other segments
including research and development, certain marketing and general and administrative costs that
support the global organization and the amortization of acquired developed technology. Included in
the Americas costs are all research and development costs including the costs associated with the
Companys India operations.
The operating expenses for the Americas segment include $2.3 million, $3.0 million, and $3.3
million of amortization expense on intangible assets in 2010, 2009 and 2008, respectively.
In accordance with the segment reporting topic of the FASB Codification, the Company has
included a summary of financial information by reportable segment. The following table presents the
revenues, expenses and operating income (loss) by reportable segment for the years ended December
31, 2010, 2009 and 2008 (in thousands):
Year Ended December 31, | ||||||||||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||||||||||
Americas | EMEA | APAC | Consolidated | Americas | EMEA | APAC | Consolidated | |||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||
Software license |
$ | 44,254 | $ | 4,972 | $ | 5,224 | $ | 54,450 | $ | 29,629 | $ | 2,617 | $ | 2,440 | $ | 34,686 | ||||||||||||||||
Services |
176,912 | 26,269 | 10,569 | 213,750 | 155,768 | 24,637 | 9,445 | 189,850 | ||||||||||||||||||||||||
Hardware and other |
27,784 | 925 | 208 | 28,917 | 21,161 | 771 | 199 | 22,131 | ||||||||||||||||||||||||
Total revenue |
248,950 | 32,166 | 16,001 | 297,117 | 206,558 | 28,025 | 12,084 | 246,667 | ||||||||||||||||||||||||
Costs and Expenses: |
||||||||||||||||||||||||||||||||
Cost of revenue |
102,682 | 17,634 | 8,476 | 128,792 | 82,849 | 16,641 | 7,971 | 107,461 | ||||||||||||||||||||||||
Operating expenses |
101,742 | 10,523 | 4,972 | 117,237 | 88,844 | 9,511 | 4,409 | 102,764 | ||||||||||||||||||||||||
Depreciation and amortization |
8,658 | 324 | 179 | 9,161 | 10,398 | 760 | 260 | 11,418 | ||||||||||||||||||||||||
Restructuring charge |
| | | | 3,019 | 20 | 843 | 3,882 | ||||||||||||||||||||||||
Total costs and expenses |
213,082 | 28,481 | 13,627 | 255,190 | 185,110 | 26,932 | 13,483 | 225,525 | ||||||||||||||||||||||||
Operating income (loss) |
$ | 35,868 | $ | 3,685 | $ | 2,374 | $ | 41,927 | $ | 21,448 | $ | 1,093 | $ | (1,399 | ) | $ | 21,142 | |||||||||||||||
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
Year Ended December 31, 2008 | ||||||||||||||||
Americas | EMEA | APAC | Total | |||||||||||||
Revenue: |
||||||||||||||||
Software license |
$ | 51,392 | $ | 8,885 | $ | 5,036 | $ | 65,313 | ||||||||
Services |
192,483 | 32,163 | 11,321 | 235,967 | ||||||||||||
Hardware and other |
33,371 | 1,750 | 800 | 35,921 | ||||||||||||
Total revenue |
277,246 | 42,798 | 17,157 | 337,201 | ||||||||||||
Costs and Expenses: |
||||||||||||||||
Cost of revenue |
118,003 | 23,163 | 10,772 | 151,938 | ||||||||||||
Operating expenses |
118,908 | 12,200 | 5,621 | 136,729 | ||||||||||||
Depreciation and amortization |
11,912 | 591 | 196 | 12,699 | ||||||||||||
Restructuring charge |
4,369 | 204 | 94 | 4,667 | ||||||||||||
Asset impairment charges |
5,205 | | | 5,205 | ||||||||||||
Total costs and expenses |
258,397 | 36,158 | 16,683 | 311,238 | ||||||||||||
Operating income |
$ | 18,849 | $ | 6,640 | $ | 474 | $ | 25,963 | ||||||||
The following table presents the goodwill, long-lived assets and total assets by
reporting segment for the years ended December 31, 2010 and 2009 (in thousands):
As of December 31, 2010 | As of December 31, 2009 | |||||||||||||||||||||||||||||||
Americas | EMEA | APAC | Total | Americas | EMEA | APAC | Total | |||||||||||||||||||||||||
Goodwill, net |
$ | 54,766 | $ | 5,536 | $ | 1,963 | $ | 62,265 | $ | 54,766 | $ | 5,551 | $ | 1,963 | $ | 62,280 | ||||||||||||||||
Long lived assets |
16,265 | 589 | 652 | 17,506 | 16,236 | 746 | 599 | 17,581 | ||||||||||||||||||||||||
Total assets |
254,788 | 17,541 | 8,135 | 280,464 | 249,049 | 10,746 | 4,916 | 264,711 |
For the years ended December 31, 2010, 2009, and 2008, we derived revenue from sales to
customers outside the United State of approximately $80.7 million, $58.0 million, and $81.5
million, respectively. Our remaining revenue was derived from domestic sales.
Our services revenue consists of fees generated from professional services and customer
support and software enhancements related to our software products as follows (in thousands):
Year ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Professional services |
$ | 131,871 | $ | 112,770 | $ | 159,005 | ||||||
Customer support and software enhancements |
81,879 | 77,080 | 76,962 | |||||||||
Total services revenue |
$ | 213,750 | $ | 189,850 | $ | 235,967 | ||||||
License revenues related to our warehouse and non-warehouse product groups are as follows
(in thousands):
Year ended December 31, | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Warehouse |
$ | 30,966 | $ | 20,145 | $ | 35,709 | ||||||
Non-Warehouse |
23,484 | 14,541 | 29,604 | |||||||||
Total license revenue |
$ | 54,450 | $ | 34,686 | $ | 65,313 | ||||||
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
9. Related Party Transactions
During the year ended December 31, 2009, the Company purchased software and services for
approximately $50,000 from a company whose former President and Chief Executive Officer is a member
of Manhattans Board of Directors. There were no purchases from this vendor during 2010 and 2008.
As of December 31, 2010, there were no amounts outstanding to this vendor.
10. Subsequent Events
The Company evaluated all subsequent events that occurred after the date of the
accompanying financial statements and determined that there were no events or transactions during
this subsequent event reporting period which require recognition or disclosure in the Companys
financial statements.
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MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2010, 2009 and 2008
11. Quarterly Results of Operations (Unaudited)
Following is the quarterly results of operations of the Company for the year ended December
31, 2010 and 2009. The unaudited quarterly results have been prepared on substantially the same
basis as the audited Consolidated Financial Statements.
Quarter Ended | ||||||||||||||||||||||||||||||||
March 31, | June 30, | Sept 30, | Dec 31, | March 31, | June 30, | Sept 30, | Dec 31, | |||||||||||||||||||||||||
2009 | 2009 | 2009 | 2009 | 2010 | 2010 | 2010 | 2010 | |||||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||||||||
Statement of Operations Data: |
||||||||||||||||||||||||||||||||
Revenue: |
||||||||||||||||||||||||||||||||
Software license |
$ | 4,922 | $ | 4,126 | $ | 11,360 | $ | 14,278 | $ | 14,207 | $ | 15,485 | $ | 12,092 | $ | 12,666 | ||||||||||||||||
Services |
50,843 | 49,422 | 46,917 | 42,668 | 53,461 | 54,780 | 53,486 | 52,023 | ||||||||||||||||||||||||
Hardware and other |
5,060 | 4,861 | 7,017 | 5,193 | 6,281 | 7,376 | 8,436 | 6,824 | ||||||||||||||||||||||||
Total revenue |
60,825 | 58,409 | 65,294 | 62,139 | 73,949 | 77,641 | 74,014 | 71,513 | ||||||||||||||||||||||||
Costs and expenses: |
||||||||||||||||||||||||||||||||
Cost of license |
1,424 | 1,035 | 1,162 | 1,105 | 1,549 | 1,611 | 1,471 | 1,541 | ||||||||||||||||||||||||
Cost of services |
23,157 | 21,319 | 19,697 | 20,176 | 24,064 | 24,906 | 24,661 | 25,145 | ||||||||||||||||||||||||
Cost of hardware and other |
4,121 | 4,177 | 5,846 | 4,242 | 5,069 | 6,205 | 7,092 | 5,478 | ||||||||||||||||||||||||
Research and development |
10,227 | 9,188 | 8,781 | 8,485 | 10,440 | 10,334 | 9,866 | 9,868 | ||||||||||||||||||||||||
Sales and marketing |
10,079 | 9,026 | 8,626 | 8,406 | 10,468 | 12,073 | 10,329 | 9,832 | ||||||||||||||||||||||||
General and administrative |
7,962 | 7,251 | 7,462 | 7,271 | 8,461 | 8,177 | 8,721 | 8,668 | ||||||||||||||||||||||||
Depreciation and amortization |
3,165 | 3,010 | 2,665 | 2,578 | 2,415 | 2,318 | 2,262 | 2,166 | ||||||||||||||||||||||||
Restructuring charge |
63 | 3,829 | | (10 | ) | | | | | |||||||||||||||||||||||
Total costs and expenses |
60,198 | 58,835 | 54,239 | 52,253 | 62,466 | 65,624 | 64,402 | 62,698 | ||||||||||||||||||||||||
Operating income (loss) |
627 | (426 | ) | 11,055 | 9,886 | 11,483 | 12,017 | 9,612 | 8,815 | |||||||||||||||||||||||
Other (loss) income, net |
(233 | ) | (404 | ) | 255 | (374 | ) | (498 | ) | 304 | (188 | ) | 239 | |||||||||||||||||||
Income (loss) before income taxes |
394 | (830 | ) | 11,310 | 9,512 | 10,985 | 12,321 | 9,424 | 9,054 | |||||||||||||||||||||||
Income tax provision (benefit) |
132 | (274 | ) | 327 | 3,639 | 3,790 | 4,132 | 3,192 | 2,609 | |||||||||||||||||||||||
Net income (loss) |
$ | 262 | $ | (556 | ) | $ | 10,983 | $ | 5,873 | $ | 7,195 | $ | 8,189 | $ | 6,232 | $ | 6,445 | |||||||||||||||
Basic earnings (loss) per share |
$ | 0.01 | $ | (0.02 | ) | $ | 0.50 | $ | 0.27 | $ | 0.33 | $ | 0.38 | $ | 0.29 | $ | 0.31 | |||||||||||||||
Diluted earnings (loss) per share |
$ | 0.01 | $ | (0.02 | ) | $ | 0.50 | $ | 0.26 | $ | 0.32 | $ | 0.36 | $ | 0.28 | $ | 0.29 | |||||||||||||||
Shares used in computing basic earnings per share |
23,017 | 22,391 | 22,116 | 22,128 | 21,958 | 21,718 | 21,248 | 21,078 | ||||||||||||||||||||||||
Shares used in computing diluted earnings per share |
23,058 | 22,391 | 22,175 | 22,667 | 22,535 | 22,776 | 22,051 | 22,350 | ||||||||||||||||||||||||
69
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Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
Item 9A. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to
be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms,
and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.
No system of controls, no matter how well designed and operated, can provide absolute
assurance that the objectives of the system of controls are met, and no evaluation of controls can
provide absolute assurance that the system of controls has operated effectively in all cases. Our
disclosure controls and procedures however are designed to provide reasonable assurance that the
objectives of disclosure controls and procedures are met.
As of the end of the period covered by this report, our Chief Executive Officer and Chief
Financial Officer evaluated, with the participation of management, the effectiveness of our
disclosure controls and procedures. Based on the evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, as of the end of the period covered by this report, our
disclosure controls and procedures were effective to provide reasonable assurance that the
objectives of disclosure controls and procedures are met.
Managements Report on Internal Control over Financial Reporting
Managements assessment of the effectiveness of the Companys internal control over financial
reporting as of December 31, 2010 and the report of Ernst & Young LLP on the effectiveness of the
Companys internal control over financial reporting are contained on pages 43 and 44 of this
report.
Change in Internal Control over Financial Reporting
During the fourth quarter of 2010, there were no changes in our internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting, including any corrective actions with regard to
material weaknesses.
Item 9B. | Other Information |
None.
PART III
Item 10. | Directors, Executive Officers and Corporate Governance |
The information required by this item is incorporated by reference from the information
contained in our Proxy Statement for the Annual Meeting of Shareholders expected to be filed with
the SEC on or prior to April 15, 2011 under the captions Election of Directors, Executive
Officers, Section 16(a) Beneficial Ownership Reporting Compliance, Code of Ethics and Board
Committees.
Item 11. | Executive Compensation |
The information required by this item is incorporated by reference from the relevant
information contained in our Proxy Statement for the Annual Meeting of Shareholders expected to be
filed with the SEC on or prior to April 15, 2011 under the captions Director Compensation,
Executive Compensation, Compensation Committee Interlocks and Insider Participation and
Compensation Committee Report.
70
Table of Contents
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters |
The information required by this item is incorporated by reference from the relevant
information contained in our Proxy Statement for the Annual Meeting of Shareholders expected to be
filed with the SEC on or prior to April 15, 2011 under the caption Security Ownership of Certain
Beneficial Owners and Management. The information required by this item with respect to the
Companys securities authorized for issuance under equity compensation plans is included in Part
II, Item 5 of this Annual Report on Form 10-K and is incorporated by reference herein.
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
The information required by this item is incorporated by reference from the relevant
information contained in our Proxy Statement for the Annual Meeting of Shareholders expected to be
filed with the SEC on or prior to April 15, 2011 under the captions Related Party Transactions
and Election of Directors.
Item 14. | Principal Accountant Fees and Services |
The information required by this item is incorporated by reference from the relevant
information contained in our Proxy Statement for the Annual Meeting of Shareholders expected to be
filed with the SEC on or prior to April 15, 2011 under the caption Ratification of Appointment of
Independent Registered Public Accounting Firm.
PART IV
Item 15. | Exhibits and Financial Statement Schedules |
(a)
|
1. | Financial Statements. | ||
The response to this item is submitted as a separate section of this Form 10-K. See Item 8. | ||||
2. | Financial Statement Schedule. | |||
The following financial statement schedule is filed as a part of this report: |
SCHEDULE II
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
MANHATTAN ASSOCIATES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Balance at | Additions | |||||||||||||||
Beginning of | Charged to | Net | Balance at | |||||||||||||
Classification: | Period | Operations | Deductions | End of Period | ||||||||||||
Allowance for Doubtful Accounts |
||||||||||||||||
For the year ended: |
||||||||||||||||
December 31, 2008 |
$ | 6,618,000 | $ | 4,907,000 | $ | 5,959,000 | $ | 5,566,000 | ||||||||
December 31, 2009 |
$ | 5,566,000 | $ | 3,593,000 | $ | 4,216,000 | $ | 4,943,000 | ||||||||
December 31, 2010 |
$ | 4,943,000 | $ | 3,467,000 | $ | 2,699,000 | $ | 5,711,000 | ||||||||
Deferred Tax Asset Valuation Allowance |
||||||||||||||||
For the year ended: |
||||||||||||||||
December 31, 2008 |
$ | 4,331,000 | $ | 3,326,000 | $ | | $ | 7,657,000 | ||||||||
December 31, 2009 |
$ | 7,657,000 | $ | 230,000 | $ | | $ | 7,887,000 | ||||||||
December 31, 2010 |
$ | 7,887,000 | $ | | $ | 198,000 | $ | 7,689,000 | ||||||||
Restructuring Charge Accrual |
||||||||||||||||
For the year ended: |
||||||||||||||||
December 31, 2008 |
$ | | $ | 4,667,000 | $ | 2,880,000 | $ | 1,787,000 | ||||||||
December 31, 2009 |
$ | 1,787,000 | $ | 3,882,000 | $ | 5,414,000 | $ | 255,000 | ||||||||
December 31, 2010 |
$ | 255,000 | $ | | $ | 192,000 | $ | 63,000 |
71
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All other schedules are omitted because they are not required or the required information
is shown in the consolidated financial statements or notes thereto.
3. Exhibits.
See (b) below.
(b) The exhibits listed below under Exhibit Index are filed with or incorporated by reference in
this Report. Where such filing is made by incorporation by reference to a previously filed
registration statement or report, such registration statement or report is identified in
parentheses.
(c) See Item 15(a)(2).
72
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MANHATTAN ASSOCIATES, INC. |
||||
By: | /s/ Peter F. Sinisgalli | |||
Peter F. Sinisgalli | ||||
Chief Executive Officer, President and Director |
Date: February 23, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant in the capacities and on the
dates indicated.
Signature | Title | Date | ||
/s/ John J. Huntz, Jr.
|
Chairman of the Board | February 23, 2011 | ||
/s/ Peter F. Sinisgalli
|
Chief Executive Officer, President and Director | February 23, 2011 | ||
(Principal Executive Officer) | ||||
/s/ Dennis B. Story
|
Executive Vice President, Chief Financial Officer and Treasurer | February 23, 2011 | ||
(Principal Financial and Accounting Officer) | ||||
/s/ Brian J. Cassidy
|
Director | February 23, 2011 | ||
/s/ Paul R. Goodwin
|
Director | February 23, 2011 | ||
/s/ Thomas E. Noonan
|
Director | February 23, 2011 | ||
/s/ Deepak Raghavan
|
Director | February 23, 2011 | ||
/s/ Pete Kight
|
Director | February 23, 2011 | ||
/s/ Dan J. Lautenbach
|
Director | February 23, 2011 | ||
73
Table of Contents
EXHIBIT INDEX
The following exhibits are filed with this Report.
Exhibit | ||||
Number | Description | |||
2.1 | Agreement and Plan of Merger, by and among the
Registrant, Madison Acquisition Corp., Evant, Inc. and
Ted Schlein, as Shareholder Representative, dated
August 10, 2005 (Incorporated by reference to Exhibit
2.1 to the Companys Form 8-K (File No. 000-23999),
filed on August 16, 2005). |
|||
2.2 | Voting Agreement, by and between the Registrant and the
shareholders of Evant, Inc., dated August 10, 2005
(Incorporated by reference to Exhibit 2.2 to the
Companys Form 8-K (File No. 000-23999), filed on
August 16, 2005). |
|||
2.3 | Amendment Number 1 to Agreement and Plan of Merger, by
and among Evant, Inc., the Registrant, Madison
Acquisition Corp. and Ted Schlein, as Shareholder
Representative, dated as of August 15, 2005
(Incorporated by reference to Exhibit 2.3 to the
Companys Form 8-K (File No. 000-23999), filed on
August 16, 2005). |
|||
3.1 | Articles of Incorporation of the Registrant
(Incorporated by reference to Exhibit 3.1 to the
Companys Registration Statement on Form S-1 (File No.
333-47095), filed on February 27, 1998). |
|||
3.2 | Amended Bylaws of the Registrant (Incorporated by
reference to Exhibit 3.2 to the Companys Form 8-K
(File No. 000-23999), filed on October 23, 2007). |
|||
4.1 | Provisions of the Articles of Incorporation and Bylaws
of the Registrant defining rights of the holders of
common stock of the Registrant (Incorporated by
reference to Exhibit 4.1 to the Companys Registration
Statement on Form S-1 (File No. 333-47095), filed on
February 27, 1998). |
|||
4.2 | Specimen Stock Certificate (Incorporated by reference
to Exhibit 4.2 to the Companys Pre-Effective Amendment
No. 1 to its Registration Statement on Form S-1 (File
No. 333-47095), filed on April 2, 1998). |
|||
10.1 | Lease Agreement by and between Wildwood Associates, a
Georgia general partnership, and the Registrant dated
September 24, 1997 (Incorporated by reference to
Exhibit 10.1 to the Companys Registration Statement on
Form S-1 (File No. 333-47095), filed on February 27,
1998). |
|||
10.2 | First Amendment to Lease between Wildwood Associates, a
Georgia general partnership, and the Registrant dated
October 31, 1997 (Incorporated by reference to Exhibit
10.2 to the Companys Registration Statement on Form
S-1 (File No. 333-47095), filed on February 27, 1998). |
|||
10.3 | Second Amendment to Lease Agreement between Wildwood
Associates, a Georgia general partnership, and the
Registrant, dated February 27, 1998 (Incorporated by
reference to Exhibit 10.8 to the Companys
Pre-Effective Amendment No. 1 to its Registration
Statement on Form S-1 (File No. 333-47095), filed on
April 2, 1998). |
|||
10.4 | Third Amendment to Lease Agreement between Wildwood
Associates and the Registrant, dated October 24, 2000
(Incorporated by reference to Exhibit 10.9 to the
Companys Annual Report for the period ended December
31, 2000 (File No. 000-23999), filed on April 2, 2001). |
|||
10.5 | Lease Agreement by and between Wildwood Associates, a
Georgia general partnership, and the Registrant, dated
June 25, 2001 (Incorporated by reference to Exhibit
10.1 to the Companys Quarterly Report for the period
ended June 30, 2001 (File No. 000-23999), filed August
14, 2001). |
74
Table of Contents
Exhibit | ||||
Number | Description | |||
10.6 | First Amendment to Lease Agreement between Wildwood Associates, and the Registrant, dated June 10,
2002 (Incorporated by reference to Exhibit 10.6 to the Companys Annual Report for the period ended
December 31, 2006 (File No. 000-23999), filed on March 14, 2007). |
|||
10.7 | Second Amendment to Lease Agreement between 2300 Windy Ridge Parkway Investors LLC, and the
Registrant, dated February 27, 2007 (Incorporated by reference to Exhibit 10.7 to the Companys
Annual Report for the period ended December 31, 2006 (File No. 000-23999), filed on March 14, 2007). |
|||
10.8 | Lease Agreement by and between Tektronix UK Limited, Manhattan Associates Limited and Manhattan
Associates, Inc., dated October 21, 1999 (Incorporated by reference to Exhibit 10.27 to the
Companys Annual Report for the period ended December 31, 1999 (File No. 000-23999), filed on March
30, 2000). |
|||
10.9 | Lease (Burlington Business Center) by and between Gateway Rosewood, Inc. and Manhattan Associates,
Inc., dated August 23, 2004 (Incorporated by reference to Exhibit 10.7 to the Companys Annual
Report for the period ended December 31, 2004 (File No. 000-23999), filed on March 16, 2005). |
|||
10.10 | Agreement to Build and Lease between Orchid Apartments Private Limited and Manhattan Associates
India Development Centre Private Limited, executed on November 19, 2004 (Incorporated by reference
to Exhibit 10.8 to the Companys Annual Report for the period ended December 31, 2004 (File No.
000-23999), filed on March 16, 2005). |
|||
10.11 | Lease Agreement between IGE Energy Services (UK) Limited, Manhattan Associates Limited and Manhattan
Associates, Inc., dated February 1, 2005 (Incorporated by reference to Exhibit 10.9 to the Companys
Annual Report for the period ended December 31, 2004 (File No. 000-23999), filed on March 16, 2005). |
|||
10.12 | Sub-Sublease Agreement between Scientific Research Corporation, a Georgia corporation, and the
Registrant, dated July 2, 1998 (Incorporated by reference to Exhibit 10.19 to the Companys Annual
Report for the period ended December 31, 1998 (File No. 000-23999), filed on March 31, 1999). |
|||
10.13 | Sub-Sublease Agreement between The Profit Recovery Group International 1, Inc., a Georgia
corporation, and the Registrant, dated August 19, 1998 (Incorporated by reference to Exhibit 10.20
to the Companys Annual Report for the period ended December 31, 1998 (File No. 000-23999), filed on
March 31, 1999). |
|||
10.14 | Standard Sublease Agreement between Life Office Management Association, Inc. and the Registrant,
dated October 20, 2000 (Incorporated by reference to Exhibit 10.17 to the Companys Annual Report
for the period ended December 31, 2000 (File No. 000-23999), filed on April 2, 2001). |
|||
10.15 | Standard Sublease Agreement between Chevron USA Inc. and the Registrant, dated November 20, 2000
(Incorporated by reference to Exhibit 10.18 to the Companys Annual Report for the period ended
December 31, 2000 (File No. 000-23999), filed on April 2, 2001). |
|||
10.16 | Form of Indemnification Agreement with certain directors and officers of the Registrant
(Incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report for the period ended
June 30, 2004 (File No. 000-23999), filed on August 9, 2004). |
|||
10.17 | Form of Tax Indemnification Agreement for direct and indirect shareholders of Manhattan Associates
Software, LLC (Incorporated by reference to Exhibit 10.7 to the Companys Registration Statement on
Form S-1 (File No. 333-47095), filed on February 27, 1998). |
|||
10.18 | Summary Plan Description of the Registrants Money Purchase Plan & Trust, effective January 1, 1997
(Incorporated by reference to Exhibit 10.3 to the Companys Registration Statement on Form S-1 (File
No. 333-47095), filed on February 27, 1998). |
75
Table of Contents
Exhibit | ||||
Number | Description | |||
10.19 | Summary Plan Description of the Registrants 401(k) Plan and Trust, effective January 1, 1995
(Incorporated by reference to Exhibit 10.4 to the Companys Registration Statement on Form S-1 (File
No. 333-47095), filed on February 27, 1998). |
|||
10.20 | * | Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by reference to Exhibit 10.10 to
the Companys Registration Statement on Form S-1 (File No. 333-47095), filed on February 27, 1998). |
||
10.21 | * | First Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.22 to the Companys Annual Report for the period ended December 31, 1998
(File No. 000-23999), filed on March 31, 1999). |
||
10.22 | * | Second Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.23 to the Companys Annual Report for the period ended December 31, 1998
(File No. 000-23999), filed on March 31, 1999). |
||
10.23 | * | Third Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.24 to the Companys Annual Report for the period ended December 31, 1998
(File No. 000-23999), filed on March 31, 1999). |
||
10.24 | * | Fourth Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.25 to the Companys Annual Report for the period ended December 31, 1999
(File No. 000-23999), filed on March 30, 2000). |
||
10.25 | * | Fifth Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by
reference to Exhibit 4.8 to the Companys Form S-8 (File No. 333-68968), filed on September 5,
2001). |
||
10.26 | * | Sixth Amendment to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by
reference to Annex A to the Companys Proxy Statement for its Annual Meeting held May 17, 2002 (File
No. 000-23999), filed on April 24, 2002). |
||
10.27 | * | Amendment No. 7 to the Manhattan Associates, Inc. 1998 Stock Incentive Plan (Incorporated by
reference to Exhibit 4.10 to the Companys Form S-8 (File No. 333-105913), filed on June 6, 2003). |
||
10.28 | * | Form of Composite Stock Option Agreement (Incorporated by reference to Exhibit 10.1 to the Companys
Quarterly Report for the period ended March 31, 2006 (File No. 000-23999), filed on May 4, 2006). |
||
10.30(a) | * | Executive Employment Agreement by and between the Registrant and Peter F. Sinisgalli, effective as
of February 25, 2004 (Incorporated by reference to Exhibit 10.28 to the Companys Annual Report for
the period ended December 31, 2003 (File No. 000-23999), filed on March 15, 2004). |
||
(b) | * | Modification dated July 19, 2007 by and between the Company and Peter F. Sinisgalli to the Executive
Employment Agreement dated February 25, 2004 (Incorporated by reference to Exhibit 10.1 to the
Companys Form 8-K (File No. 000-23999), filed on July 24, 2007). |
||
10.31 | * | Separation and Non-Competition Agreement by and between the Registrant and Peter F. Sinisgalli,
effective as of February 25, 2004 (Incorporated by reference to Exhibit 10.29 to the Companys
Annual Report for the period ended December 31, 2003 (File No. 000-23999), filed on March 15, 2004). |
||
10.32 | * | Executive Employment Agreement by and between the Registrant and Jeffrey Mitchell, effective as of
September 3, 1999 (Incorporated by reference to Exhibit 10.32 to the Companys Annual Report for the
period ended December 31, 2003 (File No. 000-23999), filed on March 15, 2004). |
76
Table of Contents
Exhibit | ||||
Number | Description | |||
10.33 | * | Executive Non-Competition and Severance Agreement by and between the Registrant and Jeffrey S.
Mitchell, dated June 22, 2004 (Incorporated by reference to Exhibit 10.1 to the Companys Quarterly
Report for the period ended June 30, 2004 (File No. 000-23999), filed on August 9, 2004). |
||
10.34 | * | Executive Employment Agreement by and between the Registrant and Jeffry Baum, effective as of
October 30, 2000 (Incorporated by reference to Exhibit 10.36 to the Companys Annual Report for the
period ended December 31, 2003 (File No. 000-23999), filed on March 15, 2004). |
||
10.35 | * | Executive Employment Agreement by and between the Registrant and Dennis B. Story, effective as of
February 18, 2006 (Incorporated by reference to Exhibit 10.1 to the Companys Form 8-K (File No.
000-23999), filed on February 22, 2006). |
||
10.36 | * | Severance and Non-Competition Agreement by and between the Registrant and Dennis B. Story, effective
as of February 18, 2006 (Incorporated by reference to Exhibit 10.2 to the Companys Form 8-K (File
No. 000-23999), filed on February 22, 2006). |
||
10.37 | * | Executive Employment Agreement by and between the Registrant and Pervinder Johar, effective as of
March 30, 2006. (Incorporated by reference to Exhibit 10.1 to the Companys Form 8-K (File No.
000-23999), filed on January 2, 2009). |
||
10.38 | * | Severance and Non-Competition Agreement by and between the Registrant and Pervinder Johar, effective
as March 30, 2006. (Incorporated by reference to Exhibit 10.2 to the Companys Form 8-K (File No.
000-23999), filed on January 2, 2009). |
||
10.39 | * | Separation Agreement and Release by and between the Registrant and Pervinder Johar, dated December
31, 2008. (Incorporated by reference to Exhibit 10.1 to the Companys Form 8-K (File No.
000-23999), filed on January 7, 2009). |
||
10.40 | * | Form of Modification Agreement for Terms and Conditions for Stock Options. (Incorporated by
reference to Exhibit 10.3 to the Companys Form 8-K (File No. 000-23999), filed on January 2, 2009). |
||
10.41 | * | Severance and Non-Competition Agreement by and between the Registrant and David Dabbiere, effective
as of September 29, 2008. (Incorporated by reference to Exhibit 10.4 to the Companys Form 8-K
(File No. 000-23999), filed on January 2, 2009). |
||
10.42 | Form of License Agreement, Software Maintenance Agreement and Consulting Agreement (Incorporated by
reference to Exhibit 10.18 to the Companys Pre-Effective Amendment No. 1 to its Registration
Statement on Form S-1 (File No. 333-47095), filed on April 2, 1998). |
|||
10.43 | Form of Software License, Services and Maintenance Agreement (Incorporated by reference to Exhibit
10.21 to the Companys Annual Report for the period ended December 31, 1998 (File No. 000-23999),
filed on March 31, 1999). |
|||
10.44 | * | 2007 Stock Incentive Plan, as amended by the First Amendment thereto (Incorporated by reference to
Annex A to the Companys Definitive Proxy Statement related to its 2009 Annual Meeting of
Shareholders (File No. 000-23999) filed on April 20, 2009). |
||
10.45 | * | Written Summary of Manhattan Associates, Inc. 2009 Annual Cash Incentive Plan (Incorporated by
reference to Exhibit 10.1 to the Companys Form 8-K (File No. 000-23999), filed on June 19, 2009). |
77
Table of Contents
Exhibit | ||||
Number | Description | |||
10.46 | * | Written Summary of Manhattan Associates, Inc. 2009 Supplemental Cash Incentive Plan (Incorporated by
reference to Exhibit 10.2 to the Companys Form 8-K (File No. 000-23999), filed on June 19, 2009). |
||
10.47 | * | Written Summary of Manhattan Associates, Inc. Annual Cash Incentive Plan (Incorporated by
reference to Exhibit 10.47 to the Companys Annual Report for the period ended December 31, 2009 (File No. 000-23999), filed on February 19, 2010). |
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10.48 | * | Form of Manhattan Associates, Inc. Restricted Stock Award Agreement for Employees (Incorporated by
reference to Exhibit 10.48 to the Companys Annual Report for the period ended December 31, 2009 (File No. 000-23999), filed on February 19, 2010). |
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10.49 | * | Form of Manhattan Associates, Inc. Restricted Stock Award Agreement for Non-Employee Directors (Incorporated by
reference to Exhibit 10.49 to the Companys Annual Report for the period ended December 31, 2009 (File No. 000-23999), filed on February 19, 2010). |
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21.1 | List of Subsidiaries. |
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23.1 | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm. |
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31.1 | Certificate of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 | Certificate of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32.1 | Certificate of Chief Executive Officer and Chief Financial Officer. |
* | Management contract or compensatory plan or agreement. |
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